Unlocked – Premium Earnings 7-30-19: Apple and Electronic Arts

• Posted by Greg Harmon
• on July 30th, 2019

Two names today that report after the close tonight, Apple, $AAPL, and Electronic Arts, $EA.

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Apple, $AAPL

Apple, $AAPL, rose from a December low and met resistance at a lower high at the end of April. it pulled back to a higher low at the end of May and then reversed. It reached falling trend resistance this week and has paused there into earnings. The price action has built a large symmetrical triangle and it is right at the power zone, 2/3 of the way through and with an important 5th touch. The target on a break is 299. A break to the upside here would often lead to a powerful move from this pattern. Into the report it has a RSI holding in the bullish zone with the MACD flat and positive. There is support lower at 206.50 and 203 then 199 and 195.50 before 191 and 185.50. There is resistance above at 210.50 and 215 then 222.75 and 231. The reaction to the last 6 earnings reports has been a move of about 5.48% on average or $11.40 making for an expected range of 196.50 to 219.75. The at-the money August 2 Expiry Straddles suggest a smaller $9.55 move by Expiry with Implied Volatility at 59% above the September at 25%. Short interest is low under 1%. Open interest is focused from 185 to 200, biggest at 185 and 195 on the Put Side. On the Call side it builds from 205 to a peak at 210 then tails to 220.

Trade Idea 1: Buy the August 2 Expiry 207.50/202.50-200 1×2 Put Spread for 5 cents.

Trade Idea 2: Buy the August 2 Expiry 210/212.50 Call Spread ($1.10) and sell the August 2 Expiry 195 Put for 10 cents.

Trade Idea 3: Buy the August 2 Expiry /September 220 Call Calendar ($2.20) and sell the August 2 Expiry 195 Put for $1.10.

Trade Idea 4: Sell the August 2 Expiry 192.50/220 Strangle for a $1.50 credit.

#1 gives the downside with leverage and a possible entry at 200. #2 and #3 give the upside using leverage and may put you in the stock at 195. #4 is profitable on a close between 191 and 221.50 at Expiry. I prefer #1, #3 or #4.

Electronic Arts, $EA

Electronic Arts, $EA, bounced in December, reaching back to the shy of the 200 day SMA when it met resistance in February. It pulled back from there and established a support zone that held until the middle of July when the 200 day SMA had dropped down to price again. Into the report it has pushed lower and is threatening a continuation. It has a RSI falling in the bearish zone and the MACD flat. There is support lower at 86.60 and 85 then 80 and 77 before 74.50. There is resistance above at 90 and 92.65 then 95.30 and 98.30 before 101 and 103.50. The reaction to the last 6 earnings reports has been a move of about 6.18% on average or $5.40 making for an expected range of 81.50 to 92.50. The at-the money August 2 Expiry Straddles suggest a similar $5.50 move by Expiry with Implied Volatility at 84% above the September at 34%. Short interest is moderate at 3.2%. Open interest is spread from 75 to 92.50 on the Put Side. On the Call side it is also widely spread but much bigger at 89.

Trade Idea 1: Buy the August 2 Expiry 86/83 1×2 Put Spread for free.

Trade Idea 2: Buy the August 2 Expiry 87.50/90 Call Spread ($1.00) and sell the August 2 Expiry 82 Put for 10 cents.

Trade Idea 3: Buy the August 2 Expiry/August 30 Exp 93 Call Calendar ($0.90) and sell the August 2 Expiry 82 Put for free.

Trade Idea 4: Sell the August 2 Expiry 80/95 Strangle for a $1.10 credit.

#1 gives the downside with leverage and a possible entry at 83. #2 and #3 give the upside using leverage and may put you in the stock at 82. #4 is profitable on a close between 78.90 and 96.10 at Expiry. I prefer #3 or #4.

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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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