Unlocked: Premium Earnings Trades for Morgan Stanley and Hasbro

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

This is what I laid out for premium subscribers earlier today in Hasbro and Morgan Stanley. I traded #3 in Hasbro, but also sold the May 60 Puts, while I traded #3 in Morgan Stanley….

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Two names today, that report before the open Monday, Hasbro, $HAS, and Morgan Stanley, $MS.

Hasbro, $HAS

Hasbro, $HAS, had a long consolidation before moving higher off of 52 in January. That move stalled again at 62 and has been moving sideways until a break higher to start April. That break out targets 72. Heading into earnings it is stalling mid way, with the RSI in the bullish zone, while the MACD is rising. There is support lower at 64.25 and 63.15 followed by 61.85 and 60. There is resistance above at 66.25 before free air. The reaction to the last 6 earnings reports has been a move of about 4.37% on average or $2.90 making for an expected range of 62.75 to 68.80. The at-the money May Straddles suggest a larger $3.90 move by Expiry with Implied Volatility at 24% above the July at 21%. Short interest is high at 12.6%. Open interest is very large above at the 67.5 Strike.

Trade Idea 1: Buy the May 65/67.5 Call Spread for $1.25.

Trade Idea 2: Buy the May 65/67.5 1×2 Call Spread for $0.15.

Trade Idea 3: Buy the May 65/67.5/70 Call Butterfly for $0.50.

#1, #2 and #3 all give the upside, with #2 using margin. I prefer #2 or #3.

Morgan Stanley, $MS

Morgan Stanley, $MS, popped in December and then fell back. Since then it has traded in an ascending triangle. It peeked over that triangle Wednesday and has pulled back with the market today. The RSI is bullish but pulling back and the MACD going up. There is support lower at 36.75 and 36 followed by 35.40 and 34.85. There is resistance at 37 and 37.55 followed by 38 and 39.10 before the target of the triangle break at 40.25. The reaction to the last 6 earnings reports has been a move of about 1.82% on average or $0.70 making for an expected range of 36.15 to 37.55. The at-the money April 24 weekly Straddles suggest a larger $1.35 move by Expiry with Implied Volatility at 31% above the May at 21%. Short interest is low under 1%. Open interest favors the 37.5 Strike next week.

Trade Idea 1: Buy the April 24 weekly 37/38 Call Spread for $0.40

Trade Idea 2: Buy the April 24 weekly 37/37.5/38 Call Butterfly for a 12 cents.

Trade Idea 3: Buy the April 24 weekly/May 38 Call Calendar for $0.20.

Trade Idea 4: Sell the April 24 weekly/May 35 Put Calendar for a 17 cent credit.

#1 and #2 look for a move higher but not between 37.50 and 38 next week with the big open interest at 37.50. #3 gives upside longer term and #4 adds margin and leverage. I like #2 best or #3 and #4 together.

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