Premium Earnings 10-10-18: Walgreens Boots

One names today one that reports before the open Thursday, Walgreens Boots, $WBA.

Walgreens Boots, $WBA

Walgreens Boots, $WBA, made a peak in January and pulled back. It has moved in a rounding bottom fashion since, creating a Cup. The last two weeks it has consolidated, perhaps building the Handle, of the pattern. A break higher would give a target to 88.50. Into the report the Bollinger Bands® are squeezing, and it has a RSI pulling back in the bullish zone with the MACD level. There is support lower at 72.15 and 70.60 then 67.50 and 66 before 62.80 and 60. There is resistance above at 74.40 and 80.30 then 82.30 and 86.85 before 88. The reaction to the last 6 earnings reports has been a move of about 4.77% on average or $3.50 making for an expected range of 70.25 to 77.25. The at-the money October 12 Expiry Straddles suggest a smaller $3.00 move by Expiry with Implied Volatility at 65% above the November at 25%. Short interest is moderate at 3.1%. Open interest is big from 67 to 69 and then again builds from 70.50 to a peak at 73 and tails to 74 on the Put Side. On the Call side it is bigger and found from 74 to 76.

Trade Idea 1: Buy the October 12 Expiry 73/71 1×2 Put Spread for free.

Trade Idea 2: Buy the October 12 Expiry 74/75.50 Call Spread ($0.75) and sell the October 12 Expiry 69.50 Put for 50 cents.

Trade Idea 3: Buy the November 75/October 12 Expiry 76 Call Diagonal ($1.15) and sell the October 19 Expiry 69.50 Put for $0.75.

Trade Idea 4: Sell the October 12 Expiry 69.50/76.50 Strangle for a $0.70 credit.

#1 gives the downside with leverage and a possible entry at 71. #2 and #3 give the upside using leverage and may put you in the stock at 69.50 this week (#2) or next (#3). #4 is profitable on a close between 68.80 and 77.20 at Expiry. I prefer #3 or #4.