Equity Put Buying Ahead Of Earnings: A Bullish Catalyst?

For the last several days the screen that shows me option block trades has been full of large single-stock put buys. I filter for blocks of 500 contracts or more, so these are not ETraders in their pajamas. These are big boys.

Given how widespread the put buying is, and that the expirations of choice are in May and June, it is not a stretch to guess that investors/traders are buying protection for earnings season. I find this noteworthy because large investors may well be the best-informed and therefore their put buying may warrant caution.

However in the instances they will be wrong, those puts will likely wither very quickly but still serve as a backstop to get even longer stocks that don’t end up disappointing (with earnings). And if overall disappointments are few, that coupled with the potential for a post-earnings resumption of stock buybacks could light a fire under a market that “feels” very skeptical (myself included) that the next large tradable move will be to the upside. “Caveat Venditor”.

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Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.