Pier 1 Imports Earnings Play with Options

Pier 1 Imports (ticker: $PIR) reports earnings before the bell Thursday morning. Coming into this event the price action has been in a bull flag for over a month after a move higher off of the consolidation established through February and March. A look at the chart below shows that the technicals are

setting up for a move higher, and that move started Tuesday. The Relative Strength Index (RSI) is sloping up and broke through the mid line and the Moving Average Convergence Divergence (MACD) indicator is about to cross positive. It is at resistance of the 50 day Simple Moving Average (SMA) and just above the 20 day SMA and just short of the top of the flag at 11.83. A nice upside set up, but there is that pesky earnings event tomorrow. You could wait for the release and then play it higher on a move up or look to the June options. Currently the June 11/12 Call Spread is offered at 60 cents. With the stock price near 11.35 that is only a 25 cent premium to the intrinsic value. Not bad but not great either, probably due to the elevated implied volatility. But since the chart is set up to move higher you can reduce the cost of the spread by selling the June 11 Put against it for 20 cents. This reduces the debit to 40 cents. If the stock does nothing then the long 11 call can be sold for about that cost. If it falls be low 11 then you will need to buy back the short put. If it drives higher to 12 or more than the pay off is $1 for 40 cents premium paid. There have been better trades but at 2.5:1 reward to risk for a one day trade it is worth considering if you agree with the upside bias.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

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.

blog comments powered by Disqus
Dragonfly Caps Blog