Premium Earnings 1-30-17: Mastercard and UPS

• Posted by Greg Harmon
• on January 30th, 2017

Two names today that report before the open tomorrow, Mastercard, $MA, and UPS, $UPS.

Mastercard, $MA

Mastercard, $MA, started higher in July confirming a Deep Crab harmonic. The potential Reversal Zone (PRZ) for that is at 116. It stalled in November and pulled back, reversing finally in the new year. Last week it hit a new high and started back lower again and continues into earnings. It has a RSI that is falling in the bullish zone, while the MACD is crossed down and dropping. There is support lower at 107.50 and 106.60 followed by 105.60 and 103. There is resistance at 111 and then free air. The reaction to the last 6 earnings reports has been a move of about 2.47% on average or $2.70 making for an expected range of 105.70 to 111.10. The at-the money February 3 Expiry Straddles suggest a larger $3.45 move by Expiry with Implied Volatility at 36% above the February at 22%. Short interest is low under 1%. Open interest is on the Put side with the biggest at 108. On the Call side it is large at 108 and 115 but biggest at 110.

Trade Idea 1: Buy the February 3 Expiry 108/106 1×2 Put Spread for a 10 cent credit.

Trade Idea 2: Buy the February 3 Expiry 108/110/112 Call Butterfly for $0.45.

Trade Idea 3: Buy the February 3 Expiry/February 110 Call Calendar (45 cents) and sell the February 3 Expiry 105 Put for a 15 cent credit.

Trade Idea 4: Sell the February 3 Expiry 104/112 Strangle for a $0.88 credit.

#1 gives the downside using leverage and may put you in the stock at 104. #2 and #3 give the upside and #3 may put you in the stock at 105. #4 is profitable on a close from 103.12 to 112.88 at Expiry. I prefer #1 or #3.

UPS, $UPS

UPS, $UPS, pushed higher in June out of a falling wedge. It made a peak in July and slowly drifted lower against falling trend resistance. In November it broke that resistance to the upside and made a Measured move higher before finding a top in December. The pullback since then has built a Cup and today’s drop starts a Handle to go with it. It has a RSI that is retrenching in the bullish zone, and a MACD that is stalling. There is support lower at 115.50 and 113.60 followed by 112.50 and 111.65 then 111 and 109.50. There is resistance above at 118 and 120.20. The reaction to the last 6 earnings reports has been a move of about 1.35% on average or $1.60 making for an expected range of 115 to 118.30. The at-the money February 3 Expiry Straddles suggest a larger $2.80 move by Expiry with Implied Volatility at 27% above the February at 17%. Short interest is low at 1.7%. Open interest on the Put side is big at 112 and 115. On the Call side it is focused at 118 and 121.

Trade Idea 1: Buy the February 3 Expiry/February 118 Call Calendar (30 cents) and sell the February 3 Expiry 112 Put for 4 cents.

Trade Idea 2: Buy the February 3 Expiry 116/114 1×2 Put Spread for 8 cents.

Trade Idea 3: Buy the February 3 Expiry 117/118 Call Spread (42 cents) and sell the February 3 Expiry 112 Put for 16 cents.

#1 and #3 give the upside, and #3 may put you in the stock at 112. #2 gives the downside with leverage and a possible entry at 112. I prefer #1 or #2.

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