Unusual Stock Options Volume for Signet Jewelers (SIG) May Be a Barometer

Hours ahead of the third-quarter earnings disclosure for Signet Jewelers (SIG), the circumstances don’t look particularly appetizing. Although SIG stock lit up the radar for unusual stock options volume – and with more traders piling into bullish call options as opposed to puts – the ultimate trajectory for the Tuesday session remains up in the air.

According to Zacks Equity Research, “SIG is likely to register a decrease in both the top and bottom lines in its third-quarter fiscal 2023 earnings on Dec 6, before the opening bell. The Zacks Consensus Estimate for revenues is pegged at $1,482 million, indicating a 3.8% dip from the prior-year fiscal quarter’s reported figure.”

Further, the investment guide noted that “quarterly earnings has been stable in the past 30 days at 30 cents per share, implying a 79% decline from the prior-year fiscal quarter’s tally.” Therefore, the smart money might stay on the sidelines regarding SIG stock.

On the other hand, Signet might benefit from the unique dynamics associated with the COVID-19 crisis. Billed as the world's largest retailer of diamond jewelry per its website, Signet naturally benefits from marriage proposals. And according to the Washington Post, that’s exactly what transpired throughout the quarantine period.

For many couples, the shared challenges associated with the pandemic and the intimacy that such pressures triggered convinced them to tie the knot. Combined with an unprecedented wave of stimulus checks and the rise of the personal saving rate during the worst of the crisis, the narrative seemingly bodes very well for SIG stock.

Still, skyrocketing inflation throughout this year took a toll on consumers due to the loss of purchasing power. Therefore, it’s not just the results of Signet’s Q3 report that matters but also its forward guidance.

Options Traders Target a Big Move in SIG Stock

Following the close of the Dec. 5 session, SIG stock represented one of the names listed under Barchart.com’s screener for unusual stock options volume. Per the website, this metric shows the difference between the current volume and the average volume over the past month, highlighting unusual activity.

Specifically, volume for SIG options hit 12,536 contracts against an open interest reading of 25,167. Call volume reached 7,425 contracts while put volume came out to 5,111. The implied volatility (IV) rank or the at-the-money average IV relative to the highest and lowest values over the past one year hit 40.88%.

Per Barchart.com’s latest read, the current IV stands at 69.16%. Interestingly, the peak in IV value reached 94.98% on March 8, 2022. Later, the IV low pinged at 51.31% on April 5 of this year. Not surprisingly, the 60-month beta for SIG stock registers as 2.18. This is far above the threshold of 1, indicating that SIG swings more wildly than the overall market.

Adding to the bearish sentiment, the put/call open interest ratio for Signet stands at 1.03. Typically, the delineation between optimism and pessimism is 0.70, with figures higher than this threshold indicating that traders are buying more puts than calls.

Nevertheless, Wall Street experts remain unusually bullish on SIG stock. Currently, based off five analysts, two rate Signet as a strong buy while three rate it as a hold, for a consensus rating of “moderate buy.”

What Signet Might Say About the Economy

Back in November 2008 when the major equity indices were melting down, internet search engine providers offered a real-time gauge of sentiment for the consumer economy. Queries for luxury goods such as diamonds slipped. In contrast, queries for jobs, mortgages and refinancing increased.

Even more startling, a survey of affluent consumers – defined at the time as having an average income of $209,500 or roughly $294,000 in 2022 dollars – revealed that the well to do changed their shopping behavior: they shopped less often and more strategically by making lists or researching available prices.

In other words, while the ebb and flow of SIG stock might attract traders, all investors should tune into Signet’s Q3 earnings disclosure. Obviously, marriage proposals represent a major milestone in people’s lives. Therefore, if economic pressures are so severe that it’s dissuading consumers from traversing this important step, then it’s critical for investors to consider adjusting their strategies.

Further, what’s distinct about Signet as an economic barometer is the binary framework. While government data regarding consumer health can bake in (or out) various convoluted metrics, with SIG stock, the logical deduction is intuitive and straightforward: either folks feel comfortable shelling out money for their loved ones or they don’t.

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