Premium Earnings 9-18-13

• Posted by Greg Harmon
• on September 18th, 2013

Two names today, one that reports after the close Wednesday, Oracle, $ORCL, and one before the open Thursday, Pier 1 Imports, $PIR. The Fed statement comes out at 2pm and Bernanke press conference starts at 2:30pm.

Oracle, $ORCL

Oracle, $ORCL, has been going through a series of gap down and recover moves since March. But earlier this week it broke above a falling trend resistance line. Consolidating there today, at the 200 day Simple Moving Average (SMA), into earnings, the Relative Strength Index (RSI) is in bullish territory and moving higher with the Moving Average Convergence Divergence (MACD) indicator rising as well. The short term bias is to the upside. There is resistance higher at 33.65 and 33.90 before 34.50 and 35.20 with a gap to fill between 35.32 and 35.40. Support comes lower at 32.30 and 32 before 31.55,31.20 and 30. The reaction to the last 6 earnings reports has been a move of about 4.79% on average or $1.60 making for an expected range of 32.80 to 35. The at-the money September Straddles suggest a similar $1.60 move by Expiry with Implied Volatility at 74% above the October at 32%. Activity in the options market saw a large double diagonal, selling March 30 Puts and buying the September 29 Puts, and selling the September 32 Calls and buying the March 33 Calls, 4000x. This looks for short term downside protection, with a long term bullish view and they did it for a credit.

Trade Idea 1: Buy the October 33/35 Call Spread for $0.85.

Trade Idea 2: Buy the October 33 Call for $1.20.

Trade Idea 3: Sell the September 32/35 Strangle for $0.50 credit.

Trade Idea 4: Sell the September 32/35 Strangle and buy the October 32/35 Strangle for $0.45.

Trade Idea 5: Buy the September/October 35 Call Calendar for 18 cents.

I like #5 best, then #4.

Pier 1 Imports, $PIR

Pier 1 Imports, $PIR, is testing a similar downtrending resistance line. The RSI is bullish and rising as the MACD indicator has reversed and is moving higher. This has an upside bias, but the Shooting Star candle today raises a little caution. Support lower comes first at 23 and 22.70 before 22.30 and 21.70 with the previous bottom at 20.66. There is resistance at 23.90 and 24.45 followed by 24.65 and 25.25. The reaction to the last 6 earnings reports has been a move of about 1.80% on average or $0.42 making for an expected range of 22.95 to 23.80. The at-the money September Straddles suggest a larger $1.20 move by Expiry with Implied Volatility at 75% above the October at 35%. Open Interest at the September 22 Put dwarfs all other strikes, and could become an anchor.

Trade Idea 1: Buy the September/October 24 Call Calendars for $0.40.

Trade Idea 2: Buy the October 24/25 Call Spreads for $0.40.

Trade Idea 3: Sell the September/October 22 Put Calendars for a $0.20 credit.

Trade Idea 4: Buy the October 22/21 1×2 Put Spread for $0.05.

Trade Idea 5: Buy the September 23/22 1×2 Put Spread for $0.05.

Trade Idea 6: Buy September 23/22 Put Spread and sell an October 21 Put for $0.05.

I like #1 best for upside play and and then #5 or #6.

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