Earnings Freebie Ideas on Visa

Visa, $V, is consolidating between 202 and 205 as it heads into earnings tonight. It is a bit extended from the 20 day Simple Moving Average (SMA) and the Relative Strength Index (RSI) is running flat at the technically overbought level of 70. Notice that it has not been much over 70 in the pasty year before a pullback or consolidation. Today’s candlestick at 2:30 is also a bearish engulfing candle. The Moving Average Convergence Divergence (MACD) indicator is also leveling and you can see on the histogram that it is tightening against the trigger. These all give a short term bias to the downside or more consolidation within the uptrend. There is no resistance above 205.25, but a Measured Move higher to 222 if if takes off to the upside. Support comes lower at 198.35 followed by 194.25 and 187 before 182.50. The reaction to the last 6 earnings reports has been a move of about 4.05% on average or $8.25 making for an expected range of 195.50 to 211.75. The at-the money Weekly November Straddles suggest a smaller $6.75 move by Expiry with Implied Volatility at 55% above the November at 27%. Short interest is negligible. Open Interest for November 1 centers on the 205 strike on the call side and is a bit more spread out on the put side between 195 and 205. Following are some trade ideas that limit capital and have high potential reward to risk ratios.

Visa, $V
v

Trade Idea 1: Buy the November1 200/195 Put Spread for $1.50.

Trade Idea 2: Buy the November1 200/December 190 Put Diagonal for a $0.30 credit. Looking for a move lower and a recovery to hold above 190 by December Expiry.

Trade Idea 3: Buy the November 200/190 Put Spread for $3.40.

Trade Idea 4: Buy the November/December 210 Call Calendar for $2.45.
A play for the longer term recovery or continued upside.

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