Quest Diagnostics Bulls Take Control as Puts Drain Away

DGX heads into tomorrow's Q2 print with the options market flipping dramatically from caution to confidence — a sharp reversal from the defensive posture described in the preview published just four days ago.

The most striking development since that earlier piece is the collapse in put demand. The put/call ratio has fallen to 0.35, nearly three standard deviations below its 20-day average of 0.67 — close to the lowest reading of the past year. On Monday it touched 0.32, its 52-week low. Four days ago, the PCR was elevated and climbing; today it has swung to the opposite extreme, with call buying overwhelming put hedging. That is a meaningful reversal of sentiment, not a drift. The stock has pulled back modestly since the earlier preview — down about 0.4% on Tuesday to $206.84, giving back a portion of the month's 6% gain — but the options market is pricing anything but defensiveness into the print.

Short interest tells a story that has also shifted since the July 18 article. SI has risen roughly 10% over the past week to 3.83% of the free float — reversing the week-prior decline that was the dominant short-interest narrative heading into the originally scheduled July 21 date. That said, the borrow market remains entirely relaxed: availability is above 1,000% of short interest, meaning shares to lend vastly outnumber shares already borrowed, and the cost to borrow has barely moved at around 0.51%. New short positions face no friction, but the lending conditions carry no squeeze signal either.

The fundamental debate remains the same one that has divided the Street for months. Bulls point to 7.1% revenue growth to $2.81 billion, a consumer-initiated testing platform up 35% year-over-year, and a series of upward target revisions from analysts following the Q1 print. Baird's Eric Coldwell nudged his target to $236 last week — above the consensus mean of $224 — while maintaining a Neutral rating, consistent with the broader Street posture: most analysts see modest upside but are not pressing hard on either side. Bears focus on declining revenue per requisition, volume softness from Corewell and Fresenius, and anticipated price flattening in 2026 that limits margin expansion room. At 18.4x trailing earnings and a PE that has expanded roughly one full turn over the past month, the stock is not cheap enough to absorb a guidance cut without a reaction.

Tomorrow's print will test whether the sudden surge in call positioning — the sharpest options sentiment swing in at least a year — reflects genuine conviction about the quarter's numbers, or simply a positioning squeeze ahead of the open.