Premium Earnings 8-19-15

Only one name today that reports after the close tonight, Netapp, $NTAP.

Netapp, $NTAP
ntap

Netapp, $NTAP, has been falling in a channel since failing to break over a double top at 44 in December. The 50 day SMA has been acting as resistance on any bounce on the way down and it has fallen through the bottom of the channel a couple of times. The RSI is in the bearish zone into earnings and falling, while the MACD is about to cross down. There is support at 30.00 and 29.35 with a gap to 27.57 below that before 26.20. There is resistance above at 31.50 and 34.50. The reaction to the last 6 earnings reports has been a move of about 4.63% on average or $1.40 making for an expected range of 28.75 to 31.75. The at-the money August Straddles suggest a smaller $1.80 move by Expiry with Implied Volatility at 78% above the September at 36%. Short interest is moderate at 4.6%. Open interest is very large on the Put side below at 28.5 and 29, with some size on the Call side at 35 above.

Trade Idea 1: Buy the August 30/29 Put Spread for $0.40.

Trade Idea 2: Buy the August 30/29-28.5 1×2 Put Spread for 15 cents.

Trade Idea 3: Buy the August 30.5/31.5 1×2 Call Spread for free.

Trade Idea 4: Sell the August 28.5/32 Strangle for a 60 cent credit.

#1, and #2 give the downside, with #2 using margin. #3 looks for a bounce but not above the channel. #4 is profitable on a close between 27.9 and 32.60 at Expiry. I prefer #2 and #3 together.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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