Shares of VMware Inc (NYSE:VMW) are up 1% at $153.18 in afternoon trading, as the tech firm gears up to release its second-quarter report after the market closes tomorrow, Aug. 23. Below we will dive into what the options market is pricing in for the stock's post-earnings moves, as well as how VMW stock has been performing on the charts of late.
VMware stock has been moving higher on the charts, advancing more than 40% since bottoming out near $108 back in February. More recently, the stock bounced off support at the 80-day moving average -- historically a bullish signal -- and is now up 53% year-over-year.
Looking at VMW's earnings history, the stock has closed higher the day after the company reported in six of the last eight quarters, including a 6.1% surge in early June. During this time frame, the shares have moved 4.4% the day after earnings, on average, regardless of direction. This time around, however, the options market is pricing almost double that -- an 8.2% move -- for Friday's trading.
Digging deeper, the security's Schaeffer's put/call open interest ratio (SOIR) comes in at 1.39, which ranks in the 94th percentile of its annual range. This lofty ratio indicates that near-term VMW options traders have rarely been more put-skewed during the past 12 months.
Analysts are unconvinced, despite VMW's technical strength. Currently, eight of 21 brokerage firms maintain "hold" or worse ratings. A strong earnings report tomorrow could prompt analyst upgrades.
Lastly, short interest has plunged nearly 30% during the past two reporting periods, but still represents 12.7% of the stock's total available float. At VMware stock's average daily pace of trading, it would take more than eight sessions for shorts to buy back their bearish bets. A positive earnings surprise tomorrow could shake loose more shorts.