Puts Stay Hot Ahead of Workday Earnings

Recent earnings reactions have been poor for WDAY

When we checked in on Workday Inc (NASDAQ:WDAY) earlier this month, put buying had been picking up, and that trend has only accelerated since. The 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) now stands at 1.75, ranking just 3 percentage points from a 12-month low -- hinting at bearish expectations from options traders.

Looking closer, put open interest is actually at a 52-week high right now. The most populated strike on the put side of the aisle is the January 2020 110-strike put, followed by the December 130 and 125 puts, and there's also notable open interest at the January 2019 85-strike put. This is all especially noteworthy since WDAY earnings are due out after the close tomorrow, Thursday, Nov. 29.

Recent speculators may be considering the cloud stock's historical earnings performances. More specifically, the shares have closed lower the day after earnings in four straight quarters, dropping more than 9% the session after last quarter's release. Overall, WDAY has averaged a one-day swing of 5.3% over the past two years, and this time the options market is pricing in a 9% post-earnings move, regardless of direction.

Looking closer at the charts, Workday is gaining today, last seen up 4.7% at $145.29, rallying alongside other cloud stocks. The shares sport a year-to-date gain of 43%, and are trying to climb back to their all-time high of $157.12 from Sept. 4.

Data from Schaeffer's Senior Quantitative Analyst Rocky White suggests WDAY could keep moving higher, since the equity recently pulled back to its 10-month moving average after a lengthy strength above the long-term trendline. Following three prior signals such as this, the security has averaged a four-week gain of 8.4%, and has been higher each time.