Premium Earnings 3-5-12

Two names for today, Verifone, $PAY, reports tonight and Dick’s Sporting Goods, $DKS, in the morning.

Verifone, $PAY

Verifone, $PAY, is getting smacked back lower with the market today, as it heads into earnings. Sitting at the recent flag there is support lower between 45.50 and 45.00 followed by 43.90 and 42.90 before 41.60 and 39.88. Resistance higher is now at 47.10 and 49.20 followed by 52 and 55.35 before 57 and 59. The Relative Strength Index (RSI) is bullish but making a new low while the Moving Average Convergence Divergence (MACD) indicator has turned negative again. This chart has an upward bias despite the pullback and if the RSI stops and turns a bullish Positive Reversal with a target of 51.30 comes into play. Short interest at 10% makes it a little more interesting. The reaction to the last 6 earnings reports has been a move of about 6.6% on average or $3.10 making for an expected range of 43.30 to 49.50. The at-the money March Straddles imply a slightly larger move of $3.90 by Expiry next week. Implied volatility at 60% is high compared to the historical at 31%, and the April options at 47%. Activity today has focused on the upside 48, 49 ad 50 Strike Calls, all with over 350 traded against Open Interest of over 1,000.

Trade Idea 1: Sell the March 42 Puts for 40 cents.

Trade Idea 2: Buy the March 47/48 Call Spreads for 60 cents.

Trade Idea 3: Buy the March 47/48 Call Spread Risk Reversal selling the 42 Puts for 20 cents.

Trade Idea 4: Buy the March 48/49/50 Call Butterfly for 35 cents.

Trade Idea 5: Sell the March 50/42 Strangle for $1.10.

Dick’s Sporting Goods, $DKS

Dick’s Sporting Goods, $DKS, has moved higher out of a consolidation zone between 44.50 and 45.20 but printed a Shooting Star, possible reversal, Friday and is confirming it lower so far today. Support lower comes at 44.50 and 42.30 followed by 41.10, 40 and 39.50. A move back over the top has a target on a Measured Move to 48.75. The RSI is bullish and a bit overbought while the MACD is negative but stalled. This chart is also biased higher but may be in for a very short term pullback. This also has about 10% short interest. The reaction to the last 6 earnings reports has been a move of about 4.8% on average or $2.20 making for a range of 43.50 to 47.90 and the at-the money Straddles suggest a larger $2.70 move by Expiry. Implied volatility at 44% is elevated compared to the historical at 25% but not much above the longer April options at 35%. The March 47 Calls are the most active contract today with over 600 traded against OI of 1,261.

Trade Idea 1: Sell the March 43 Puts for 45 cents.

Trade Idea 2: Buy the March 47 Calls for 95 cents.

Trade Idea 3: Buy the March 47/48 Call Spread for 40 cents.

Trade Idea 4: Buy the March 47/48 Call Spread Risk Reversal selling the 43 Puts for 5 cents.

Trade Idea 5: Sell the March 43/48 Strangle for $1.00.

By the way, I have not traded at all today as yet.

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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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