Premium Earnings 3-7-12

• Posted by Greg Harmon
• on March 7th, 2012

I looked at 4 names today two that report tonight, Flotek, $FTK, and H & R Block, $HRB, and two in the morning Anheuser-Busch InBev, $BUD, and Buckle, $BKE. Trade ideas are slim picking but let me share what I found.

Flotek, $FTK

Flotek, $FTK, made a double bottom printing a hammer yesterday that has held and confirmed higher today. Resistance is found at 11.10 and 12.35 followed by 13.20. Support at 10.15 and 9.38 followed by 9 and 8. The Relative Strength Index (RSI) is turning back higher while the Moving Average Convergence Divergence (MACD) indicator is negative but fading. This chart has a slight upward bias. Short interest at 19% makes it more interesting. The reaction to the last 6 earnings reports has been a move of about 16.1% on average or $1.68 making for an expected range of 8.94 to 12.30. The at-the money March Straddles imply a similar move of $1.50 by Expiry next week. Implied volatility at 130% is high compared to the historical at 59%, and the April options at 83%. Activity today has favored the 12.50 Call with over 156 traded each in the but large Open Interest of over 7,000. All these trades below have a bullish bias. If you do not believe the bull case then walk away.

Trade Idea 1: Buy the March 12.5 Calls for 25 cents.

Trade Idea 2: Buy the March 12.5/10 bull Risk Reversal for a 15 cent credit.

Trade Idea 3: Sell the March 12.5 Straddle for $2.10.
Add the March 15 Calls for 5 cents to cap upside risk

H & R Block, $HRB

H & R Block, $HRB, looks like crap. It is making new lows heading into earnings with support at 15.78 and 15.44 followed by 15.12 and 14.90 before 14.63 and 14.28. Resistance is found at 16 and 16.56 followed by 16.80, 17 and 17.25. The RSI is falling and making new lows while the MACD is negative and stable. This chart has a downward bias. The reaction to the last 6 earnings reports has been a move of about 6% on average or $0.96 making for an expected range of 14.86 to 16.78. The at-the money March Straddles imply a similar move of $1.15 by Expiry next week. Implied volatility at 51% is high compared to the historical at 21%, and the April options at 36%. Activity today has favored the 15 Put with over 2,680 traded against Open Interest of 3,874.

Trade Idea 1: Buy the March 15 Puts for 35 cents.

Anheuser-Busch InBev, $BUD

Anheuser-Busch InBev, $BUD, has been pulling back within the strong uptrend from September. Support lower comes at 65.37 and 64.15 followed by 63.16, 62.50 and 61. Resistance higher is found at 66.60 and 68.50. The RSI is bullish but falling while the MACD is negative and growing more so. This chart is biased to the downside in the very short term but higher in the intermediate term. The reaction to the last 6 earnings reports has been a move of about 4.8% on average or $3.20 making for a range of 63.60 to 70.00 and the at-the money Straddles suggest a similar $2.65 move by Expiry. Implied volatility at 27% is elevated compared to the historical at 18% and the longer April options at 22%, but none of these is high.

Trade Idea 1: Buy the March 65 Puts for 45 cents.

Trade Idea 2: Buy the April 70 Calls for 80 cents.

Buckle, $BKE

Buckle, $BKE, gapped higher last week clearing resistance then at 45.67 and has held since consolidating back into the Bollinger bands. Support lower comes at 43.85 and 43.22 followed by 41.91 and 40.30. Resistance higher is found at 48.15 and there is a target from the ascending triangle break to 56.50. and 68.50. The RSI is bullish while the MACD is positive and holding. This chart is biased to the upside. The reaction to the last 6 earnings reports has been a move of about 6.4% on average or $3.00 making for a range of 44.00 to 50.00 and the at-the money Straddles are meaningless as volume in the options on this name is anemic. I would just as well stay away.

Trade Idea 1: Buy the March 47.75 Calls for 1.05.

Trade Idea 2: Sell the March 42.75 Puts for 20 cents.

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