Premium Earnings 8-17-15

• Posted by Greg Harmon
• on August 17th, 2015

Two names today, that report before the open tomorrow, TJX, $TJX, and Home Depot, $HD.

TJX, $TJX

TJX, $TJX, had a failed breakout of an ascending triangle in March, falling back to 64. Since then it has created a “W” with a double bottom there. Now it is testing resistance with support for a more upside and a break out from the rising RSI is in the bullish zone, and bullish rising MACD. There is support lower at 69.35 and 67.15 before 66 and 64.30. There is no resistance above 71. The reaction to the last 6 earnings reports has been a move of about 3.96% on average or $2.80 making for an expected range of 68 to 73.75. The at-the money August Straddles suggest a similar $2.90 move by Expiry with Implied Volatility at 43% above the September at 22%. Short interest is low at 1%. Open interest is very large below at 65 on the Put side and at 67.5 on the Call side.

Trade Idea 1: Buy the August 70/72.5 Call Spread for $1.30.

Trade Idea 2: Buy the August 70/67.5 1×2 Put Spread for 40 cents.

Trade Idea 3: Buy the August/September 72.5 Call Calendar for $0.65.

Trade Idea 4: Buy the August/September 72.5 Call Calendar and sell the September 65 Puts for 30 cents.

#1, #3 and #4 give the upside, with #4 using margin. #3 and #4 are longer term. #2 gives the downside using margin. I prefer #4 the best.

Home Depot, $HD

Home Depot, $HD, moved higher out of consolidation and over resistance in July. this sets up an AB=CD pattern that targets 148. The RSI is in the bullish zone, while the MACD is rising. There is support lower at 118 and 116 followed by 113.50 and 112. There is resistance above. The reaction to the last 6 earnings reports has been a move of about 2.40% on average or $2.90 making for an expected range of 117.30 to 124.25. The at-the money August Straddles suggest a larger $4.00 move by Expiry with Implied Volatility at 36% above the September at 20%. Short interest is low under 1%. Open interest is very large on the Call side at 120 but also above at 123 and 126. The Put side shows some size at 115 below.

Trade Idea 1: Buy the August 120/123 Call Spread for $1.30.

Trade Idea 2: Buy the August 120/123 1×2 Call Spread for 40 cents.

Trade Idea 3: Buy the August/September 125 Call Calendar for $0.64.

Trade Idea 4: Buy the August/September 125 Call Calendar and sell the August 116 Put for 10 cents.

Trade Idea 5: Sell the August 118/120 Strangle for a $3.15 credit.

#1, and #2 give the upside, with #2 using margin. #3 and #4 give the upside for the longer term with #4 using margin. #5 is profitable on a close between 114.85 and 123.15 at Expiry. I prefer #4 or #5 the best.

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