Premium Earnings 3-25-14

• Posted by Greg Harmon
• on March 25th, 2014

Two names today, one that reports after the close, Phillips-Van Heusen, $PVH, and one before the open Wednesday, Francesca’s, $FRAN. Pickings slim today.

Phillips-Van Heusen, $PVH

Phillips-Van Heusen, $PVH, pulled back to the 117 area, made a small bounce up to the jumble of the SMA’s and fell back again to a lower low. As it sits testing 120.40 it has a gap on both sides to fill, at 112.20 below and 121.42 above. The Relative Strength Index (RSI) is falling after failing to move into bullish territory and the Moving Average Convergence Divergence (MACD) indicator looks to be avoiding a cross up , ready to fail lower. There is resistance higher at 120.40 and 121.42 followed by 130.50 and 137.75. Support lower comes at 114.30 and 112.20 followed by 107.50. The reaction to the last 6 earnings reports has been a move of about 6.08% on average or $7.25 making for an expected range of 110.50 to 125. The at-the money April Straddles suggest a similar $8.00 move by Expiry with Implied Volatility at 32% above the May at 26%. Short interest is moderate at 3%. There were buyers of the April 115 and 125 Calls yesterday and today sees sellers of the May 110 Puts.

Trade Idea 1: Sell the April/May 115 Put Calendar for a for $0.80 credit.

Trade Idea 2: Buy the April 120/125 Call Spread for $1.85.

Trade Idea 3: Buy the April/May 125 Call Calendar for $0.90.

Trade Idea 4: Sell the April 110/130 Strangle for a $1.65 credit.

I like #1 best and then combining #1 and #2 or #3 for the upside.

Francesca’s, $FRAN

Francesca’s, $FRAN, has been trying to move higher out of consolidation. The RSI has moved into the bullish range, while the MACD is nearing a cross up. Support lower comes first at 19.87 and then 17.80 followed by 16.85 and 15.70. Resistance is found at 22.50 and 22.90 followed by a gap to fill to 23.65. The reaction to the last 6 earnings reports has been a move of about 10.92% on average or $2.25 making for an expected range of 18.35 to 22.85. The at-the money April Straddles suggest a similar $2.60 move by Expiry with Implied Volatility at 58% above the March at 43% and the May at 46%. Short interest is high at 18%. This is lightly traded so play small if at all.

Trade Idea 1: Buy the April 22.5 Call for $0.70.

Trade Idea 2: Buy the April/May 22.5 Call Calendar for $0.45.

I like #2 best as there is very large open Interest at the 22.5 Strike in April that could become a magnet.

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