DGX options hit 52-week bullish extreme on earnings eve

Quest Diagnostics reports Q3 results on Wednesday. The options market has just sent its clearest bullish signal of the past year.

Call buying overwhelms puts

The put/call ratio hit 0.29 on Monday. That is the lowest reading in 52 weeks and sits 2.8 standard deviations below the 20-day mean of 1.04. To put that in context, the PCR ran above 1.35 as recently as early October. The shift from defensively positioned to aggressively call-heavy happened in a matter of days, directly ahead of the October 22 print.

Yesterday's earnings preview noted the PCR had already eased to 0.94. Monday's close took it far further. Something in the options flow accelerated sharply.

Short sellers exiting into the event

Short interest has fallen to 2.58% of free float, down roughly 20% over the past month. Borrowing conditions remain extremely loose. Availability stands at 1,607%, meaning there are more than 16 shares available to borrow for every one currently borrowed. The cost to borrow has risen 72% over the past week to 0.89%, but from a very low base. At under 1% annually, it signals no real competition for borrows. Bears are leaving, not digging in.

Analysts have been lifting targets

Barclays raised its target to $260 on October 7, maintaining Overweight. Truist and UBS both raised targets in September. The consensus mean price target sits at $251.73, about 7% above Monday's close of $234.91. No firm has cut a target in the recent window.

The last print, in July, produced an 8.6% one-day gain. The bull case rests on continued strength in advanced diagnostics and the consumer-initiated testing platform, which contributed nearly $250 million in revenue and grew 35% year-over-year. The bear case points to revenue per requisition pressure and volume softness from key accounts Corewell and Fresenius.

What to watch

The alignment of record-low PCR, shrinking short interest, and a run of analyst target increases heading into Wednesday's print is consistent with broad positioning for an upside surprise. Wikipedia attention for DGX registered a z-score of 2.5 against its own 90-day history as of late September, suggesting retail interest picked up well before this week's options move.

---

• PCR: 0.29, 52-week low, z-score -2.77
• Short interest: 2.58% of free float, down 20% over one month
• Availability: 1,607%, borrow market very loose
• Cost to borrow: 0.89%, up 72% in one week but still very low
• Mean analyst target: $251.73 vs close of $234.91
• Earnings: October 22, pre-market