This series of Trading Tips is brought to you by the Market Gear for Mac trading platform.
Market Gear released data today showing that there is a significant shift in open interest on Paychex Inc (PAYX) options that will occur following the next earnings report, which is set for Tuesday, April 6th.
The data shows that the current Put-to-Call Open Interest Ratio on all options contracts for PAYX is currently 57.2%, meaning there is a lot more open interest in the puts on the stock.
However, in looking just at the data for options that expire after April 16 (which is the next expiration month), the Put-to-Call Open Interest Ratio shifts down to 42%.
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That is a significant swing in open interest and suggests that investors are currently holding downside protection in the form of puts ahead of the earnings release.
This sort of activity can sometimes be found on stocks around earnings, but a shift from over 57% down to 42% is fairly large.
It doesn’t mean that investors are concerned that earnings will miss. In fact, the stock hit new highs this last week.
Instead, it’s more likely that by owning puts to protect their positions, a disproportionately high percentage of investors feel safe owning the stock.
The next key will be to see if the high open interest in puts diminishes after earnings, meaning that investors sell off their downside protection before expiration.
You can analyze and even trade PAYX Options using Market Gear on your Mac.
Check out our full review of Market Gear for more.