Option Traders Smiling Ahead of Earnings: SmileDirectClub Inc Stock (NASDAQ: SDC)

SmileDirectClub Inc (NASDAQ: SDC) has an upcoming earnings announcement on August 12 after the market close. While analysts are providing their projections for what the company will take home in earnings or revenue, option traders and trying to figure out how much the price will move. The expected movement is based on the pricing determined by the market of options traders buying and selling options. On Tuesday, it was the option bulls that stepped up to the plate to speculate on the outcome from the report.

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  • As you look at the 14 AUG 20 expiration, the current implied volatility is 139%. That percentage is an annualized number and it can be broken down to discrete timeframes based on the time to expiration. That dollar value of the movement that is broken down from the implied volatility is called the expected move. The current expected move for next week is +/- $1.70. That represents the 68% probability range through the end of next week.

    The call option volume surged to 2.5 times the average on Tuesday. The 20,750 call contracts traded had 40% of the volume fill at the ask price. That is an indication of option buying, which is a bullish option strategy. The trading was concentrated on the 14 AUG 20 $9 strike price, which had over 11,000 contracts traded against 607 open interest.

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    Action to Take: The activity is providing a bullish expectation for the earnings report. Using the expected move, the near-term target over the earnings is $10.50.

    Speculators may want to consider a 14 AUG 20 9/10.5/12 butterfly for $0.30 or less.