Premium Earnings 8-20-15

• Posted by Greg Harmon
• on August 20th, 2015

Two names today, one that reports after the close, Salesforce, $CRM, and one that reports before the open tomorrow, Deere, $DE.

Salesforce, $CRM

Salesforce, $CRM, spiked higher in May on takeover speculation. Since then it has settled into a symmetrical triangle and is deep into the apex. Into earnings the RSI is bouncing between 40 and 60 around the mid line with the latest move lower. The MACD is looking to cross down. There is support lower at 70.00 and 69.20 before 65.90 and 63.50. There is resistance above at 74 and 75.70 before 78.35 and free air. A break of the triangle looks for a move of $11.60. The reaction to the last 6 earnings reports has been a move of about 6.37% on average or $4.60 making for an expected range of 65.40 to 74.60. The at-the money August Straddles suggest a larger $5.30 move by Expiry with Implied Volatility at 145% above the September at 45%. Short interest is low at 2.5%. Open interest is very large on the Put side at 70 but the Call side has big OI at 70, 72.50 and 75 above.

Trade Idea 1: Buy the August 70/67.5 Put Spread for $1.20.

Trade Idea 2: Buy the August 70/67.5 1×2 Put Spread for a 30 cent credit.

Trade Idea 3: Buy the August/September 75 Call Calendar for $1.00.

Trade Idea 4: Buy the August/September 75 Call Calendar and sell the August 66.5 Puts for free.

Trade Idea 4: Sell the August 65/75 Strangle for a $1.65 credit.

#1, and #2 give the downside, with #2 using margin. #3 looks for a bounce or continuation higher and #4 adds leverage. #5 is profitable on a close between 63.35 and 76.65 at Expiry Friday. I prefer #2 or #5 the best short term and #4 for a longer trade.

Deere, $DE

Deere, $DE, is breaking a trend support line that dates back to the October 2014 low in the market into earnings. This is a failure of an ascending triangle and targets a move lower to 85. The RSI is moving into the bearish zone, but resisting, while the MACD has crossed down and is falling. There is support lower at 91.40 and 89 followed by 87.30 and 84.75. There is resistance above at 94.35 and 97.70. The reaction to the last 6 earnings reports has been a move of about 1.83% on average or $1.70 making for an expected range of 89.80 to 93.30. The at-the money August Straddles suggest a larger $3.10 move by Expiry with Implied Volatility at 64% above the September at 26%. Short interest is high at 11.1%. Open interest is larger on the Call side and from 95 to 105 with some OI 92 to 95 the Put side.

Trade Idea 1: Buy the August 91/87.5 Put Spread for $1.00.

Trade Idea 2: Buy the August 91/87.5/85 Put Butterfly for 80 cents.

Trade Idea 3: Buy the August/September 95 Call Calendar for $1.00.

Trade Idea 4: Buy the August/September 95 Call Calendar and sell the August/September 90 Put Calendar for free.

#1, and #2 give the downside. #3 and #4 give the upside for the longer term with #4 using margin and giving short term downside protection. I prefer #4 the best.

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