Fabrinet Options Market Braces for 14% Post-Earnings Move

Options traders are pricing in a potential 14% swing in either direction for Fabrinet (FN) shares following the company's upcoming earnings announcement. The optical and electronic manufacturing services firm is scheduled to report its results after the market close on November 2.

Options Market Expectations

The anticipated move is derived from the stock's implied volatility, a key metric in options pricing that reflects market expectations for future price fluctuations. According to options data compiled by Bloomberg, this 14% implied move indicates that traders are preparing for significant price action after the results are released.

This metric is a statistical measure of expected volatility and does not predict the direction of the stock's movement. It serves as a benchmark for the magnitude of the potential price change that the market is anticipating.

Historical Performance vs. Implied Moves

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An analysis of Fabrinet's last eight earnings reports reveals a mixed record of actual price changes compared to what the options market had priced in. The stock's post-earnings move has exceeded the implied volatility on three of those eight occasions.

Here is a breakdown of the company's recent earnings reports, comparing the options-implied move to the actual stock price change the following day:

• Aug. 17, 2023: 14.2% decline (vs. 12.3% implied)
• May 4, 2023: 8.3% decline (vs. 15.2% implied)
• Feb. 2, 2023: 3.9% drop (vs. 12.9% implied)
• Nov. 3, 2022: 9.2% gain (vs. 13.0% implied)
• Aug. 18, 2022: 17.1% decline (vs. 11.1% implied)
• May 5, 2022: 2.1% gain (vs. 10.7% implied)
• Feb. 3, 2022: 19.9% fall (vs. 11.5% implied)
• Nov. 4, 2021: 6.6% decrease (vs. 12.8% implied)

Most recently, in August, the stock's 14.2% drop surpassed the 12.3% move that options traders had anticipated. Conversely, the May report saw an actual move of 8.3%, well within the 15.2% implied swing.