Four More Earnings Plays

Last night's earnings were so much fun, let's do it again. Well, two out of three have worked out, and if Expedia (EXPE) is given more time, that position will work out. I have four on my radar today, which is a bit more than usual, but I added Visa (V) after exchanging ideas with Mark Sebastian (@optionpit) on Twitter, so I'll start there.

Visa is pricing in a 3% move for earnings, but over the last four reports, the move has been 3.7%, 3.7%, 4.7% and 3.75%, respectively, with three higher and the largest move was the one lower. Thus, the straddle is attractive, but I will take it one small step forward. I am going to buy the February 8 $160 straddle and short the February 8 $155 put/$165 call strangle for a total around $3.50. Another approach would be to use a butterfly in each direction lowering the cost to $2.50, but any move past $167.50 on the upside or $152.50 on the downside would make the trade a loser. I'll stick with my initial thought on this one....316 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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