Premium Earnings 11-25-19: Palo Alto Networks and Dollar Tree

Two names today, one that reports after the close Monday, Palo Alto Networks, $PANW, and one before the open Tuesday, Dollar Tree, $DLTR.

Palo Alto Networks, $PANW

Palo Alto Networks, $PANW, pulled back from a high in February, finding support at the end of May. A bounce into July recouped 61.8% of the drop and then it turned back lower to retest the low. it held and reversed again, and is now back at the consolidation level from before the initial drop. Into the report it has a RSI overbought in the bullish zone with the MACD turning to crossing down but positive. There is support lower at 245.50 and 238.25 then 232.50 and 228.50. There is resistance above at 250 and 259. The reaction to the last 6 earnings reports has been a move of about 4.10% on average or $10.20 making for an expected range of 237.50 to 258.50. The at-the money November 29 Expiry Straddles suggest a larger $15.40 move by Expiry with Implied Volatility at 70% above the December at 36%. Short interest is moderate at 4.7%. Open interest is biggest from 240 to 225 on the Put Side. On the Call side it is smaller and spread from 225 to 270.

Trade Idea 1: Buy the November 29 Expiry 245/237.50 1×2 Put Spread for 20 cents.

Trade Idea 2: Buy the November 29 Expiry 250/260 Call Spread ($4.10) and sell the November 29 Expiry 235 Put for 2.25.

Trade Idea 3: Buy the November 29 Expiry/December 260 Call Calendar ($2.40) and sell the November 29 Expiry 235 Put for 55 cents.

Trade Idea 4: Sell the November 29 Expiry 230/270 Strangle for a $2.50 credit.

#1 gives the downside with leverage and a possible entry at 237.50. #2 and #3 give the upside using leverage and may put you in the stock at 235. #4 is profitable on a close between 227.50 and 272.50 at Expiry. I prefer #1 or #4.

Dollar Tree, $DLTR

Dollar Tree, $DLTR, rose from a bottom in August, topping out in October. It pulled back in a falling wedge from there until breaking the wedge higher today. Into the report it has a RSI rising through the mid line towards the bullish zone with the MACD turning to cross up. There is support lower at 109.50 and 107 then 103.80 and 101.50 before 100 and 98. There is resistance above at 112.75 and 115 then 118.50. The reaction to the last 6 earnings reports has been a move of about 7.73% on average or $8.60 making for an expected range of 102.25 to 119.75. The at-the money November 29 Expiry Straddles suggest a smaller $6.50 move by Expiry with Implied Volatility at 65% above the December at 35%. Short interest is low at 2.0%. Open interest is focused at 108 on the Put Side. On the Call side it is spread from 108 to 110 then 115 to 115 and 120 to 121.

Trade Idea 1: Buy the November 29 Expiry 110/106 1×2 Put Spread for 30 cents.

Trade Idea 2: Buy the November 29 Expiry 112/115 Call Spread ($1.35) and sell the November 29 Expiry 105 Put for $0.35.

Trade Idea 3: Buy the November 29 Expiry/December 118 Call Calendar ($1.00) and sell the November 29 Expiry 105 Put for free.

Trade Idea 4: Sell the November 29 Expiry 103/120 Strangle for a $0.90 credit.

#1 gives the downside with leverage and a possible entry at 106. #2 and #3 give the upside using leverage and may put you in the stock at 105. #4 is profitable on a close between 102.10 and 120.90 at Expiry. I prefer #2 or #3.

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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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