Premium Earnings 7-30-13: Amgen and Take-Two Interactive
- Posted by Greg Harmon
- on July 30th, 2013
Amgen, $AMGN, has been consolidating under 110 into earnings. The Rising Three Methods and following bull flag support a move higher to a Measured Move to 120. The Relative Strength Index (RSI) is bullish with the Moving Average Convergence Divergence (MACD) indicator moving higher, giving an upside bias. Resistance higher is found at 110 and 114. Support comes lower at 106.50 and 104 followed by 102, 100 and 95.50. The reaction to the last 6 earnings reports has been a move of about 2.68% on average or $2.95 making for an expected range of 106.30 to 112.50. The at-the money August Straddles suggest a larger $5.40 move by Expiry with Implied Volatility at 27% above the September at 24%.
Trade Idea 1: Buy the August 110 Calls for $2.50.
Trade Idea 2: Buy the August 110/115 Call Spread for $1.75.
Trade Idea 3: Sell the August/September 100 Put Calendar for a $0.75 credit.
Trade Idea 4: Buy the September 110/115 Call Spread for $2.00.
Trade Idea 5: Buy the August/September 115 Call Calendar for $1.10.
I like #1 or #5 best with #3 to reduce the cost
Take-Two Interactive, $TTWO
Take-Two Interactive, $TTWO, has been moving in a slowly expanding channel between 14.25 and 17.25. Approaching the top into earnings and consolidating it has a Measured Move higher to 17.70 and then 19.20 and 20.25. The RSI is bullish and rising, and with the MACD indicator also rising, there is an upside bias. Support lower comes first at 16.40 and then 16 and 15.25 before 14.25. The reaction to the last 6 earnings reports has been a move of about 6.57% on average or $1.12 making for an expected range of 15.85 to 18.20. The at-the money August Straddles suggest a larger $1.50 move by Expiry with Implied Volatility at 48% above the September at 42%. Activity was very large on the 17, 18 and 19 Calls in August, each with over 6000 traded Monday in what seemed to be a 1×2 split Call Spread, buying the 17 and selling both the 18 and 19 Calls. Short interest at over 15% could also play a role.
Trade Idea 1: Buy the August 17/18 Call Spread for $0.45.
Trade Idea 2: Buy the August 18 Call for $0.35.
Trade Idea 3: Buy the August 17/18-19 1×2 split Call Spread Call Calendar for $0.35.
Trade Idea 4: Sell the August 17 Straddle for a $1.35 credit.
Trade Idea 5: Sell the August 17 Straddle and buy the August 18 Call for a $1.00 credit.
I like #1 or #2 best for an upside breakout play. And #5 for a small downside reaction.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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