$STX · Schwab Network · 2026-10-27

All eyes are on Seagate today, as the hard drive maker prepares to announce its quarterly results after trading closes. Wall Street is expecting a record quarter with earnings forecast to rise to $7.44 per share and revenues to exceed $4.1 billion, representing growth of over 50%.

The driving force is the increasing demand for high-capacity hard drives as AI and cloud computing companies expand their infrastructure. Given that Seagate has outperformed Wall Street estimates about 90% of the time over the past two years , and its stock has risen by about 200% year-on-year.

But, like others in the memory sector , it has recently faced headwinds as investors scrutinize AI deals.

Seagate's stock fell by more than 20% last month. So, does this create a backlash effect? Advanced storage solutions, Diane. Whether it is internal or external. They are one of the main beneficiaries of the launch of artificial intelligence.

So, there are some difficulties here. But this company is certainly at the heart of the artificial intelligence and data storage infrastructure, and they need to achieve good numbers because their valuation, as I said, compared to Western Digital, whose stock has not changed, makes them cheaper than Seagate .

So, there's a minor issue before the earnings announcement, but as I said , we're still in the early stages of AI infrastructure, and data storage will be key to that, Diane .

I want to know your thoughts on Seagate right now, especially with the stock rising ahead of the earnings announcement.

Seagate is still down 40% and hasn't risen any further. They offered no clarity regarding deliveries to their largest customers in 2030 and 2031.

Now, will Seagate be able to counter this and say, " We have future orders, unlike what Western Digital did at the time"? But expectations in this regard are relatively low.

The projected gains were reported to be growing by approximately 57 % year-on-year if they reach $4.1 billion . But if you look at the profit margins. If they exceed the 60% level in profit margins, remember that all memory chip and hard drive manufacturers have raised their prices, and this is being absorbed by those customers who are desperate to get deliveries of these systems that are almost completely sold out this year and through 2027. This will be the key.

But if you look at the technology that Seagate might have over Western Digital. Their "Mosaic" platform and "Hammer", a heat-assisted magnetic recording platform that has gained a little traction here.

That may be the key for them to move forward, but expectations are relatively low.

The valuation, given that their profits have grown so much, has actually decreased slightly . It's not as cheap as Micron or maybe some others in this field, but yes, expectations are really relatively low .

A 40% drop, which is in bear market territory, far from the record levels we saw earlier this year.

We have seen a slight rise here, but these stocks are still down 26% so far this month alone. So, yes, it may be a starting point, but it would be better for them to achieve results, provide better guidance, and perhaps more clarity regarding their future direction .

Yes, first, a disclaimer. Liquidity is a problem for Seagate stock. Market price differences are extremely wide. If you look at today's options statistics on the ThinkUrswim platform, 78% of put options are traded between market prices.

Therefore, you really need to use price discovery here to make sure that you are not getting inefficient pricing on some of these options.

Therefore, my experimental trade is on the downside. It is a put calendar. Given the expected movement of approximately $43 for today and approximately $57 for the week. I chose an execution price of approximately 630.

I bought a put option for November 6 at an execution price of 630, and I sold a put option for October 30 at an execution price of 630 . The price was around 820 at the time. It has changed dramatically since then .

It's in the sixes range now. As I said, there are huge fluctuations in prices. You must be very careful about the entry order you place. This is a bearish bet predicting a move of about $50 down from where we are now, Tom. But, as I said, liquidity is a big problem.

Yes, let's analyze this deal. A very short-term position of "how" in this trading example. Buying weekly options on November 6th that expire in about a week and a half . Buy a put option at 630, and sell the same put option at 630 in the nearby October 30 options that expire in 3 days.

You pay approximately 820 dinars, but it's trading at a price closer to seven dollars , maybe a little less. But, as Kevin mentioned, price exploration is justified, and the amount of money you pay will be your risk.

So , if you pay 820, that's a risk of $820. As you can see here from the risk profile, it is poised to move about $50 downwards. This represents a move of approximately one standard deviation through the end of the week.

The October 30 option is approximately plus or minus $57 in either direction. So, it gives you that downside exposure targeting an execution price of 630, right? But, at the same time, you probably have a range of $40 to $50 above and below the $ 630 strike price to be profitable in this trade. So, keep that in mind.

I think one of the keys when looking at these calendars is that we are always talking about the divergence between implied fluctuations. Okay, you are buying an implied volatility of approximately 87% total in the weekly put option at 630 for November 6.

Buying or selling carries an implied volatility of approximately 112% in short-term options overall. Therefore, this divergence lowers the price entry point in that trade.

I think one of the keys when looking at this trade is that the 630 strike price on the weekly October 30 options that you are selling in this bearish one-week calendar is still trading at around nine and a half dollars.

It is essentially outside the price range by $50 to the downside. Therefore, you can see that there is a lot of external option premium due to the higher volatility at those levels.

So, keep that in mind. So , if the stock stays above 630, its value will reach zero, right? And you sell those options. But you definitely need a slight downward move in this deal.

What you don't want to happen is for the stock to rise, or you don't want the stock to collapse and perhaps fall below 590 or 580, within that range of levels. Then you start losing profitability in the downward trend.

Kevin, I've taken a more conservative approach, and I'm sure my price will be slightly different as well, because the stock has moved a bit. However, considering the weekly October 30 options, there are 3 days until the expiry date.

I will sell a neutral to bullish vertical "put" option outside the current price range. I will sell a put option at an execution price of 650, which is only about $30 outside the current price range , and then I will buy a put option at an execution price of 630.

So, it is a neutral to bullish vertical put option with a spread of $20, and we will collect about $5.50 from it as credit, sorry, not a discount. We are accumulating credit because we are making a sale.

So, this is what you can earn: $550 per contract with a risk of about $1450. However, that range is far below the 630 level.

Good odds, Kevin, in this deal. There is approximately a 65% probability that the short "bot" option will remain outside the price range at an execution price of 650. But, hold on, you're giving yourself a small margin of safety here in case the arrow goes down.

Yes, and you know, whatever the difference or strategy you choose, just make sure you are aware of the breadth of the markets and the liquidity associated with this deal. Just be aware that there is a lot of price discovery involved .

But Tom knows the risks in his deal . He knows the execution price quote minus any credit you receive. Things can vary greatly. That is the expected risk. Always be aware of what will happen if the stock settles between the two execution prices.

Herein lies some additional risk. So, yes, this is a short vertical "put" option trade with a medium to high probability.

Yes, a conservative approach here where the stock rises, or remains steady, or falls but stays above the breakeven point, which is about $644.50 in this case. So, you have a large margin of safety in the downward direction.

Higher probability of success. And Kevin's deal to correct the " bot" downward trend is here, Diane.