Retail Stock Rebounds Before Earnings Report

Clothing retailer Gap Inc (NYSE:GPS) will step into the earnings confessional after the close today. Wall Street expects the company's first-quarter results to reveal insights into how American consumers are spending going into the summer season.

Ahead of the event, Gap stock was last seen 3.4% higher to trade at $22.36. The shares recently fell from a more than two-year high of $28.59, but just bounced back above recent resistance at their 40-day moving average. Longer term, GPS sports a 178.1% year-over-year lead.

Looking at the past eight quarters, the security tends to pop after earnings results. In fact, Gap stock moved higher in its last four post-earnings sessions, including a 30.6% bounce in November. Options traders are pricing in an 18.8% swing for the security this time around, which is more than double the 9.8% move Gap stock averaged over the  last two years, regardless of direction. 

Options volume is running at double the average intraday amount before the event. So far, 21,000 calls and 8,163 puts have crossed the tape, with new positions opening at the most popular contract, the August 27 call.

Looking slightly further back, GPS sports a 50-day call/put volume ratio of 3.74 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio ranks in the 96th percentile of its annual range, which suggests the penchant for bullish bets is nothing new.