One of the more nuanced aspects of earnings season is the combination of analyst actions after earnings announcements and the coinciding activity in the Equity options.  Typically analysts and research firms render their respective opinions and adjustments after the announcements of earnings, guidance, and conference calls of the companies.  When earnings per share, revenues, and guidance beat analysts’ expectations, market participants typically witness upgrades, reiterations with price targets increases and other like minded actions.  The reverse holds true, as well. With that in mind, we witness some correlations in option sentiment and activity in recent trading.

Thursday we witnessed rather interesting events in WFM.  After reporting diluted EPS of $0.43, missing the $0.44 forecast, lighter than expected guidance on Wednesday afternoon, the security experienced a follow through of market and analyst responses on Thursday morning. Participants saw a number of downgrades by analysts on Whole Foods Markets. 

In addition to research sentiment change, traders saw some WFM option activity taking place on Thursday afternoon in the July Weekly 36 PUTs. 

In general, we typically see an increase in weekly option activity taking place during earning season. 

WFM did end the trading day down more than 11%. Though a unique a situation, we found it particularly fascinating that the underlying market sentiment, analyst opinions, and a small dose of option activity had negative connotations.