Traders on Wrong Side of Xerox Earnings Win

Short-term traders were very put-heavy

Xerox Holdings Corp (NYSE:XRX) is gaining 15% this morning to trade at $35.41, thanks to the company's third-quarter earnings beat and upwardly revised full-year profit outlook. This price action has XRX stock jumping above the 200-day moving average and testing the site of the July earnings bear gap. Xerox had moved lower following the last two earnings releases, and it appears options traders were betting on a similar move this time.

To be more specific, the equity's Schaeffer's put/call open interest ratio (SOIR) stands at 2.68, which ranks in the 100th annual percentile. This shows that traders targeting options that expire within three months are unusually put-heavy at the moment, hinting at bearish expectations.

What's more, peak open interest in the front-month November series rests at the 30-strike put. Data shows mostly buy-to-open activity here, confirming that a number of traders were betting on a pullback from XRX in the short term.

To be sure, these aren't the only skeptics, since short interest is still elevated on Xerox. By the numbers, the 7.76 million shares sold short represent nearly four days' worth of buying power, based on average daily trading volumes. This leaves the potential for short covering, which could help the shares keep rising on the charts.