Earnings Special

Earnings season is here and this is an extremely active week for earnings with a lot of big names.  If you play earnings it is an exciting week.  Going to highlight those I am interested in with ideas.  This week is like the Super Bowl of earnings trades for earnings players as there are so many great names this week.  I have shared a bunch of ideas in here on ways to play and ways I will be playing it.  Keep in mind in designing these plays I have used 8 quarter max moves data, but it is too much to type and probably of little interest to readers.  Also these plays are using friday's closing prices and prices will change into earnings so you will need to make adjustments.

AAPL

Options are pricing in a $36 move in AAPL or 7%.  This is a name that I am bullish on into earnings despite all the rumored set backs and supply cuts.  Overall I think the China story is strong and top line growth as well.  Last week saw a large position taken with 2,000 march 530-610 call spreads bought and I too have followed along.  So potential plays.

I am currently long the March 530-610 at about $14 and that spread is currently a bit cheaper.
520-540-560 call fly at about $3
520-550 1 by 2 at $3
Sell the 470-460 put spread for 2.20

My plan is to remain long the 530-610 March call spread
Add 520-540 1 by 2 call spread for around .20
Enter a 490-485 put spread @ 2.00(Hedge) Deciding on hedge size is trader specific.
Sell a 465-460 put spread for $1 to offset some costs associated with the hedge.


GOOG

Google is a name I am planning to position bearishly as the stock has been acting weak as of late.  On thursday a trader put on a fairly large 730/690 bear risk reversal selling the 730 calls and buying the 690 puts for about a $3 credit 600 contracts of each so a fairly large position ahead of earnings.  This sort of position requires a large account, but there are other ways to play this.

Options are pricing in about a $41 move or 6%.  So on the short side this would take GOOG to $664, support lies in the 697, 685,660, & 640 areas.  GOOG is going to have questions about price per click and the Mot. acquisition.  There was also a note out where a GOOG executive was saying wall street estimates were too high due to the sale of the set top box sale. I am not too sure whether or note the note was true.

Possible plays 680-660 1 by 2 put spread. (buying one 680 put and selling 2 times as many 660 puts).
Depending on fills this could be done for 0-.50.
670-650 1 by 2 put spread is another possibility for the same 0-.50 range.
A more conservative play or without the ability to be naked would be to add the wing and create a 680-660-640 put fly for depending on fill 2.25-3 range.

My Plan:

680-660 1 by 2 put spread for free.
Sell 730-740 call spread for $3... (smaller size)

IBM

IBM is a name that I like to take the bear side as well in as it is a less volatile name and the 1 by 2 put spreads always tend to offer a very high risk reward ratio.

Current plan is to position in a 190-185 1 by 2 put spread for .10-.20 debit.
Short the 195-200 call spread for about $2 (smaller size)

There is no clear trend in open interest as it is fairly well mixed.

SBUX

SBUX options are pricing in about a 2.60 move or about 6%.  SBUX is going to have to prove that YUM is alone in their struggles within China, but I do not think that is the case.  I have taken many trips to China and have seen YUM stores both in tourist locations and more traditional sites being very busy while SBUX only in tourist locations.  Another thing to watch will be European sales and whether or not they are closing more stores.  I do believe U.S. delivers strong numbers, and I am a long term bull on the name but for earnings I prefer a bearish play.  Support comes in at 52.50,51,48 & then then gap fill to 46.50 area.  Sbux did see about 3000 next weeks 55 calls trading on Friday position for earnings. The trade:

52.50-49 1 by 2 put spread for about .30 can also sell the 55-57.50 call spread for about .90... Every 3 put spreads = selling one call spread to create a free trade, which is optional and does add another element of risk.

FFIV is always a tricky one to play as high growth companies are generally extremely volatile.  Options are pricing in about 8.50 move, which is nearly a 9%.  ORCL had a solid report, which they did not mention FFIV but did essentially say they were beating their competition in many large orders and made specific mention to CRM.  Resistance is at 100,102,107 & 111 areas, while support comes 96, 94,91 & and has trend support.  Nothing of note in options chain for next week, but something to monitor at the moment.  This is a name I need more information from options trading into the report but for now some possible trades:

Sell the 100/92.50 strangle for 5.20.
Long 92.50-87.50-82.50 put fly at .55
Long 100-105-110 call fly at .80

I like the strangle sale most of all here at the moment and will probably be the play I take on a smaller scale depending on options flow.

CREE is a name that broke out on Friday and has some massive positioning to the bullish side going out in further months.  With very little positions in puts. Options are pricing in about a 2.80 move roughly 9%. Seems like a name traders want exposure to going out a bit farther.  Trade ideas:

January IV in the 37 calls at 72 & March 37 we really want to take advantage of this.  37 also aligns with the measured move priced into earnings in the report.  So I like Jan/March 37 call spread @ about .50.  As long as the stock does not crash or blow through the 37 level you can really have a massive trade here.  As after the Jan calls expire we now have a nice position to work with and create additional plays.  Could be a home run here, a trade I really like.

MCD options pricing in a 2.2 move in the 3% range.  MCD has struggles to put on any sort of sustained rally and comp sales continue to struggle and will also most likely continue to struggle in this report as well as margins.  Europe is going to be the biggest eye sore, and there had been reports of franchisee's being asked to open on Christmas day, which sounds like a last ditch effort to make sales numbers.  Trade idea:

Mcdonalds being less volatile limits a lot of great plays, but one to consider is

Jan/feb 90 calendar call spread at .30.  The play here is to play for a small pull back on earnings and then a recovery afterwards it is a low risk decent reward play and would be the only play I would make if looking into the name.

NFLX is a name that has been on some run here as of late with varying deals such as DIS and the Ichan stake, while all of this sounds great one would hope to see some good subscriber growth, which I do not believe to be the case.  Competition from AMZN Itunes and NFLX inability to strike favorable deals to carry content and make it available quickly in a streaming form are going to be difficulties facing the company probably forever.  Where as MCD was not volatile which limited plays NFLX is almost too volatile and unpredictable to make plays in.

Options are pricing in a $13 move or roughly 13%.  Options volume & OI is fairly mixed.  This is not a name I will play most likely.

A possible play would be jan/feb 85 calendar put spread for $1
&
Long jan/feb 115 calendar put spread at about $1.

This is a combo trade where the deep in the money spread serves as a hedge and will profit nicely from a move up near $115, which aligns well with the measured move.
While the 85 is your main play and profits from a move to 85 area and the a break down afterwards.
Keep in mind in this sort of play after the earnings if a favorable move occurs there are many ways to maximize the trade after that rather than just leaving them directional.  I will post some updates on possible plays for NFLX after the event although I doubt I will be involved in the trade.