Unlocked: Facebook and Skechers earnings trades

• Posted by Greg Harmon
• on April 22nd, 2015

Earlier today subscribers received this article with how to participate in Facebook and Skechers earnings. I traded Facebook for a move higher using trade #5 below on the stream, but had to raise the short strike to 78.5 to get near the price late in the day. The initial reaction in both Amgen and United Rentals looks like solid winners early.

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Two names today that reports after the close tonight Facebook, $FB, and Skechers, $SKX.

Facebook, $FB

Facebook, $FB, has had a slow drift higher after a steeper climb the first half of 2014. There was a brief attempt at a break out in March that failed, otherwise the rising channel has held. Heading into earnings it is testing the top of that channel with the RSI in the bullish range, while the MACD is rising and about to cross up. There is support lower at 80.70 and 77.45 followed by 74 and 70.50. There is resistance above at 84.40 and 86.07. The reaction to the last 6 earnings reports has been a move of about 5.15% on average or $4.35 making for an expected range of 79.30 to 88.20. The at-the money weekly April Straddles suggest a larger $4.75 move by Expiry with Implied Volatility at 85% above the May at 36%. Short interest is low at 1.7%. Open interest is very large above at the 85 Strike and then 87 as well but sizable at 82.50 should it fall.

Trade Idea 1: Buy the April 84/86.5 Call Spread for $1.10.

Trade Idea 2: Buy the April 84/86.5 1×2 Call Spread for free.

Trade Idea 3: Buy the April 84/86.5/89 Call Butterfly for $0.40.

Trade Idea 4: Buy the April 83/81-80.5 1×2 Put Spread for free.

Trade Idea 5: Buy the April/May 87 Call Calendar (68 cents) and sell the May 1 Expiry 78 Put (64 cent credit) for 4 cents.

#1, #2 and #3 give the short term upside, with #2 using margin. #4 gives the short term downside on a pullback. #5 gives the longer term upside and uses leverage to lower the cost. I prefer #2 or #3 paired with #4 or for longer term #5.

Skechers, $SKX

Skechers, $SKX, has nearly reached the 75.90 target from the symmetrical triangle break as it has leveled into consolidation into earnings. The RSI is bullish but falling while the MACD may be avoiding a cross up. There is support lower at 70 and 65 followed by 62 and 59. There is no resistance higher over 75. The reaction to the last 6 earnings reports has been a move of about 7.33% on average or $5.40 making for an expected range of 68.50 to 79.30. The at-the money May Straddles suggest a larger $7.25 move by Expiry with Implied Volatility at 46% above the June at 37%. Short interest is high at over 14%. Open interest favors the 75 to 80 Strike range in May.

Trade Idea 1: Buy the May 70/75 Call Spread for $2.85

Trade Idea 2: Buy the May 75/80 1×2 Call Spread for 40 cents.

Trade Idea 3: Buy the May 70/65 1×2 Put Spread for $0.50.

Trade Idea 4: Buy the May/June 75 Call Calendar for $1.40.

Trade Idea 5: Sell the May/June 70 Put Calendar for a 65 cent credit.

Trade Idea 6: Sell the May 70/80 Strangle for a $3.10 credit

#1 and #2 look for a move higher but not above 80 in May. #3 gives downside side and a possible entry at 60. #4 gives longer term upside looking for 75 to stall it in May while #5 adds leverage and gives downside protection til May expiry. #6 gives a good range, profitable from 66.90 to 83.10. I like #2 best alone or with #3. For longer term use #4 and #5 together. And #6 gives a great range with all the open interest. Sorry that I like so many.

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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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