Rocket Lab Stock Options Point to a Sizable Earnings Move as Neutron Concerns Persist

Rocket Lab (NASDAQ:RKLB) stock has come under pressure in the past five months, moving from a record high of $151 to a low of $43.70. This sell-off has coincided with that of other space companies, with the Tema Space Innovators ETF (AMEX:NASA) falling from $42 to $19. 

Rocket Lab Options Point to a Big Move

The options market suggests that Rocket Lab’s shares will experience high volatility after releasing its earnings on Monday. Benzinga data shows that the company has an implied volatility of 143%, much higher than the historical volatility of 85%.

Rocket Lab has a put/call volume ratio of 0.57, a sign that it has more calls than puts. Its put/call open interest ratio of 0.78, which is also bullish for the company. 

A closer look at the options chains shows that most calls are concentrated at $60, modestly higher than the current $53. There are also some more calls at $62. On the other hand, most puts are concentrated at $48. 

The rising volatility is mostly because the company will publish its financial results on Monday. Benzinga data shows analysts expect revenue to come in at $257 million, up 65% from a year earlier. 

The most recent numbers showed that Rocket Lab’s revenue jumped by 62% in the second quarter to $234 million, with its revenue backlog rising to $2.36 billion. 

These earnings come as the company works on the Iridium acquisition, which will help it become a more vertically integrated firm. Most importantly, the numbers come a few weeks after the management delayed the Neutron project again. In the aftermath, most analysts downgraded the stock target.

Rocket Lab Stock Technical Analysis

The daily chart shows that the RKLB stock has formed a series of lower lows and lower highs. Notably, it has formed a head-and-shoulders pattern, a common bearish reversal sign in technical analysis. It moved below the neckline at $56.21 and then retested that level again.

The stock has remained below the 50-day and 100-day Exponential Moving Averages (EMA). It also fell below the 61.8% Fibonacci Retracement level. Therefore, there is a risk that the stock may drop further after its earnings. If this happens, the stock may drop to $40 and below.

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