Gap Stock With Contrarian Potential Ahead of Earnings

While investors cheered upbeat earnings from retailer Ross Stores (ROST), Wall Street will get another look at the consumer health habits on Thursday after the close, when Gap Inc (NYSE:GAP) steps into the earnings confessional for its fourth-quarter report. Ahead of the event, options traders are betting bearishly.

Gap has a rather upbeat post-earnings history, finishing higher in four of the last six sessions, including an 8.2% pop back in November. Overall, the options market is pricing in a 16.5% move for Friday's trading, much larger than the historical post-earnings move of 10.5%, regardless of direction.

Gap stock was last seen trading at $27.50, chopping below its Feb. 20, 12-month high of $29.35. The shares are 37% higher in the last 12 months and up 7.6% in 2026, but are trading below the uptrend channel seen below. A short squeeze could help GAP back in. Short interest is down 13.7% in the most recent reporting period, yet 22.79 million shares of the stock's total available float is sold short.

In the options pits, the equity's 10-day put/call volume ratio of 3.97 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits in the 100th percentile of its annual range. Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.08 which ranks in the 92nd percentile of its annual range. An unwinding of these bearish bets could generate additional tailwinds.