A Pair of Earnings Plays

Intuitive Surgical (ISRG) is often a favorite play during earnings season. This name can be a big mover. Options are pricing in around 6.85% for the move today. ISRG always seem to far exceed the projected move -- or not move at all. Given that a straddle around the $525 level will run you about $35.70, it is a difficult trade to make for most folks. Even if I were to short an October $495 put/$560 call strangle, the trade would still cost around $25.20 with a maximum value of $35. I don't love this risk-reward.

Furthermore, the spread on the options are still wide and not extremely liquid, so while I'll look at the chart of ISRG, I am not going to trade it today. ISRG has moved into a past gap, which I view as bullish. When you consider the breakout move in price and the relative strength index (RSI), if I were to trade ISRG, I would probably go with the October $530-$555 call spread around $9.70 to $10.00 and just take my chances with a direction call. The long volatility play seems tough at this juncture....204 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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