Premium Earnings 10-13-15

• Posted by Greg Harmon
• on October 13th, 2015

Two names today, one that reports after the close tonight, Intel, $INTC, and one report before the open tomorrow, Blackrock, $BLK.

Intel, $INTC

Intel, $INTC, was the bonus pick last week and still looks good. It broke above the Inverse Head and Shoulders (IHS) neckline and ran over the 200 day SMA where it is consolidating in a bull flag. The Measured Move higher would take it to 36 and the IHS price objective is to at least 35.25. The RSI is bullish and running along the overbought level while the MACD still moving up. There is support lower at 31.90 and 31.15 followed by 30.70 and 30.40 before 29.60. There is resistance above at 32.55 and 33.40 before 34.60. The reaction to the last 6 earnings reports has been a move of about 3.08% on average or $1.00 making for an expected range of 31.30 to 33.30. The at-the money October Straddles suggest a larger $1.35 move by Expiry with Implied Volatility at 53% above the November at 24%. Short interest is low at 2.5%. Open interest is larger on the Put side and big at 29 with size from 29 to 32 on the Call side.

Trade Idea 1: Buy the October 32.5/33.5 Call Spread for $0.39.

Trade Idea 2: Buy the October 32.5/33.5 1×2 Call Spread for 19 cents.

Trade Idea 3: Buy the October 32.5/33.5 Call Spread and sell the October 31 Put for 12 cents.

Trade Idea 4: Sell the October 32 Straddle for a $1.40 credit.

#1, #2 and #3 give the upside, with #2 and #3 using margin. #3 looks for 31 to hold as support. #4 is profitable on a close between 30.60 and 33.40 at Expiry Friday and looks for a pin at 32. I prefer #3.

Blackrock, $BLK

Blackrock, $BLK, slowly rolled lower over 2015, making a bottom with the market in late August. From there it consolidated in a channel between 290 and 315 until it broke above that last week. The bull flag following the breakout is now dipping back into the channel into earnings. The RSI is back up in the bullish zone, while the MACD is rising. There is support lower at 306.85 and 300 followed by 290. There is resistance above at 321.75 and 329 followed by 334 and 340. The reaction to the last 6 earnings reports has been a move of about 0.88% on average or $2.80 making for an expected range of 313.50 to 319.50. The at-the money October Straddles suggest a larger $7.50 move by Expiry with Implied Volatility at 29% above the November at 20%. Short interest is low at 1.4%. Open interest favors the upside with large numbers of contracts at 320 and 330 on the Put side and 370 on the Call side.

Trade Idea 1: Buy the October 320 Call for $2.10.

Trade Idea 2: Buy the October 310/November 330 bull Risk Reversal for $1.75.

Trade Idea 3: Sell the October/November 310 Put Calendar for a $4.00 credit.

Trade Idea 4: Buy the November 330 Call and sell the October/November 310 Put Calendar for a $1.00 credit.

#1, and #2 give the upside. #3 gives the downside short term and then looks for a recovery before November Expiry. #4 adds leverage to #3 for the upside. I prefer #3 or #4 the best.

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