Premium Earnings 6-2-15

• Posted by Greg Harmon
• on June 2nd, 2015

Two names today that report after the close tonight Ambarella, $AMBA, and Guess, $GES.

Ambarella, $AMBA

Ambarella, $AMBA, had been in a long ascending triangle until it broke above 3 weeks ago. It blew past the target and continued to 95 before the pullback today into earnings. Heading into earnings the RSI is in the bullish range and holding slightly overbought, while the MACD is rising. There is support lower at 89.20 and 83.40 followed by 76. There is no resistance above 95. The reaction to the last 6 earnings reports has been a move of about 3.88% on average or $3.60 making for an expected range of 88.50 to 95.75. The at-the money weekly June 5 Expiry Straddles suggest a larger $7.20 move by Expiry with Implied Volatility at 93% above the June at 55%. Short interest is high at 26.6%. Open interest is very large at the 90 Strike below and the 95 Strike above this week.

Trade Idea 1: Buy the June 5 Expiry 92.5/90 1×2 Put Spread for a 50 cent credit.

Trade Idea 2: Buy the June 93/90/87 Put Butterfly for $1.00.

Trade Idea 3: Buy the June 5 Expiry 93/95 Call Spread and sell the June 87.5 Put for free.

Trade Idea 4: Buy the June 5 Expiry 93/96-97 1×2 Call Spread for free.

Trade Idea 5: Sell the June 5 Expiry 90/95 Strangle for a $4.50 credit.

#1, and #2 give the short term downside, with #1 using margin, and both looking for the large open interest at 90 to act as a brake. #3 and #4 give the short term upside. #5 is profitable on a close at expiry between 86.50 and 99.50. I prefer #3 the best. Then #5.

Guess, $GES

Guess, $GES, has been in a long slow grind lower with the last 4 months in a falling channel. Into earnings the price has bounced off the bottom of the channel and into the jumble of SMA. The RSI is now rising and over the mid line while the MACD is about to cross up. There is support lower at 17.50 and a gap to fill to 17.24 before 16.66 and 14.20. There is resistance higher at 18.75 and 19.35 followed by 19.55. The reaction to the last 6 earnings reports has been a move of about 7.50% on average or $1.36 making for an expected range of 16.75 to 19.50. The at-the money June Straddles suggest a larger $1.70 move by Expiry with Implied Volatility at 52% above the July at 37%. Short interest is high at 21.1%. Open interest favors the 18 to 19 Strike this month with big size at 17 below as well.

Trade Idea 1: Buy the June 18/19 Call Spread for $0.45

Trade Idea 2: Buy the June 18/19 Call 1×2 Call Spread for free.

Trade Idea 3: Buy the June 18/19/20 Call Butterfly for 20 cents.

Trade Idea 4: Buy the June 18/17 Put Spread for $0.50.

Trade Idea 5: Buy the June 18/17 1×2 Put Spread for 10 cents.

Trade Idea 6: Sell the June 17/19 Strangle for a 85 cent credit.

#1, #2 and #3 look for a move higher but not above 19 this month. #2 uses margin. #4 and #5 give the downside with #5 using margin. #6 gives a good range and is profitable between 16.15 and 19.85 at June Expiry. I like #2 and #5 together, or #6.

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