Premium Earnings 6-11-19: RH

One name today one that reports after the close tonight, Restoration Hardware, $RH.

RH, $RH

RH, the former Restoration Hardware, $RH, started falling back from a peak in March. It gapped down at the end of the month and held there until it re-approached the prior trend resistance, then continued lower. It found support at the end of May and has moved sideways through prior trend resistance ahead of the report. It has a RSI rising near the mid line with the MACD rising but negative. There is support lower at 88.40 and 84.80 then 79 and 73.50. There is resistance above at 93 and 100 then 105 and 110 before 113.25 and 120. The reaction to the last 6 earnings reports has been a move of about 17.30% on average or $16.10 making for an expected range of 76.50 to 109. The at-the money June 14 Expiry Straddles suggest a smaller $14.75 move by Expiry with Implied Volatility at 190% above the July at 77%. Short interest is extreme at over 37%. Open interest is biggest at 80 and 88 on the Put Side. On the Call side it pales in comparison.

Trade Idea 1: Buy the June 14 Expiry 91/88-80 1×2 Put Spread for free.

Trade Idea 2: Buy the June 14 Expiry 92.50/96 Call Spread ($2.10) and sell the June 14 Expiry 80 Put for free.

Trade Idea 3: Buy the June 14 Expiry/July 100 Call Calendar ($2.60) and sell the June 14 Expiry 80 Put for 40 cents.

Trade Idea 4: Sell the June 14 Expiry 75/110 Strangle for a $2.50 credit.

#1 gives the downside with leverage and a possible entry at 80. #2 and #3 give the upside using leverage and may put you in the stock at 80. #4 is profitable on a close between 72.50 and 112.50 at Expiry. I prefer #1 or #4.

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