Premium Earnings Trades 2-1-12 Part 2

For the afternoon edition two names, one tonight, Qualcomm, $QCOM, and one tomorrow morning Mastercard, $MA.

Qualcomm, $QCOM

Qualcomm, $QCOM, is breaking higher over a triple top at 59.50. It has had no overhead resistance from there but does have a target on a Measured Move on a break of the ascending triangle (if you will give me leeway from the circle) to 72. The Point and Figure Price objective is 69. Support can be found lower at 58.20 and 57.20 followed by 56.60 and 55.30 before a drop to 54.50. The Relative Strength Index (RSI), is bullish, rising and still not extreme, while the Moving Average Convergence Divergence (MACD) indicator is positive and growing again. The bias is still higher despite the big run off of 52. The reaction to the last 6 earnings reports has been a move of about 5.2% on average or $3.00 at today’s price for a range of 56.75 to 62.75. The at-the money Straddles suggests that there will be a move of $2.83 by Friday, slightly less. Implied volatility at 75% is high compared to historical at 22%. A good candidate for volatility sales.

Trade Idea 1: Buy the February monthly 60/62.5 Call Spreads for 88 cents.

Trade Idea 2: Buy the February monthly 60/62.5 Call Spreads selling the 55 Puts for 55 cents

Trade Idea 3: Buy the February monthly 60/62.5 Call Spreads selling the 55/52.5 Put Spreads for 69 cents

Trade Idea 4: Sell the February weekly 62.5/57.5 Strangle for 94 cents.

Mastercard, $MA

Mastercard, $MA, broke above short term resistance at 356.50 yesterday and is testing the 50 day Simple Moving Average (SMA) at 359.47 today ahead of earnings. Resistance is found higher at 368.30 and 375 followed by 379 and 385.30 before it has clear air. Support is found lower at 346 and 340 followed by 325, 318 and 307 before the 300 level. The RSI that has been trending higher but not yet bullish and the MACD that is positive and growing quickly. The trend is higher. The average reaction to earnings for the last 6 quarters has been a move of 4.9% or $17.30 based on today’s price for a range of about 341.5 to 376.10. The at-the-money weekly Straddle implies a move of $16.25 for a slightly tighter range by Friday. Volatility in the options at 73% is high compared to the historical at 24%, and the monthly options at 32%.

Trade Idea 1: Buy the February weekly 365/370 Call Spread for $2.20

Trade Idea 2: Buy the February weekly 365/370 Call Spreads and sell the 340 Put for 70 cents

Trade Idea 3: Buy the weekly 370/380/390 Call Butterfly for 1.50

Trade Idea 4: Buy the 370/380/390 Call Butterfly and sell the 340 Put for free
Can add the 330 Put long to cap the downside for 50 cents.

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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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