Tyson Foods (former) Premium Earnings 11-14-14

• Posted by Greg Harmon
• on November 14th, 2014

one name today that reports before the open Monday, Tyson Foods, $TSN.

Tyson Foods, $TSN

Tyson Foods, $TSN, had a strong run higher from the start of 2013 until it peaked in April 2014. Since then it has consolidated in an ascending triangle with upper resistance at 41.80. A break of the triangle higher targets a move to 47.60. Into earnings it is consolidating over the SMA’s with a RSI that is falling but in the bullish zone with the MACD crossing down. There is support lower at 39.75 and 38.20 followed by 37.10 and 36.25 before 35. Resistance higher stands at 41.80 and 43.35 before the prior top at 44.24. The reaction to the last 6 earnings reports has been a move of about 5.10% on average or $2.10 making for an expected range of 38.40 to 42.65. The at-the money November Straddles suggest a similar $2.10 move by Expiry with Implied Volatility at 46% above the December at 34%. Short interest is high at 9%. Open interest favors the 41 but a pullback could settle at the large open interest at the 38 Strike. There were sellers of January 41 Calls all day yesterday and today sees more Call selling. Options traders clearly do not like this name.

Trade Idea 1: Buy the November 41/42 1×2 Call Spread for a $0.05 credit.

Trade Idea 2: Buy the November 40/38 Put Spread and sell the December 38 Put for free.

Trade Idea 3: Buy the November/December 42 Call Calendar for $0.60.

Trade Idea 4: Sell the November/December 38 Put Calendar for a $0.25 credit.

#1 is straight directional and uses margin. You will need to hedge if it goes above 43. #2 gives the downside short term with a possible entry in December at 36 on a close under 38. #3 gives upside for the long run and #4 can be used to cut the cost and protect next week against the downside. I like #2, or #3 and #4 together.

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