History has provided a pretty good path toward today's action. On the basis of the four scenarios set out yesterday, only DealerTrak (TRAK) has failed to live up to history, although for anyone using trailing stops, this morning could have been a pretty good morning all around. There is still plenty of day left, so obviously things could change, but I certainly would advocate using trailing stops on any positions that are in the green.
Right now, I have only taken a look at Fossil (FOSL). It is one I have traded quite often. While the stock has done little the past two earnings reports, we may be set up a little better for a move this time around. The stock has done little over the past year and is in the red for 2014. Retail sales numbers didn't impress this morning, so expectations shouldn't be too high here. The company seemed to guide fairly conservatively into this quarter, so that may help as well, but it is tough to see a huge beat forthcoming.
I tend to favor Movado (MOV) at the moment. Still, Fossil has closed green after three of the last reports, and even the one down day wasn't terrible at -4.14%, with the stock opening down only 1.4%. Options are pricing in a move around 7.75%, while my charts have the upside at $120 and support at $105, with the 100-day simple moving average standing in the way of a push higher. The chart would significantly favor the bulls over $115, but until that time, it is neutral.
As far as history goes, selling the straddle or grabbing an iron condor for a net credit have been the better moves. The straddle is no slam-dunk, though. With options expiration (opex) only four days away, Fossil is reporting closer to opex than it has in the recent past. The drop to an expected move of 7.75% from the 10%-plus that we've seen over the past year makes selling a straddle or a strangle a bit less attractive.
I feel much more comfortable setting up a May position that is short the $105-$100 put spread and short the $120-$125 call spread for a net credit around $1.60. This was closer to $2.00 yesterday, so I'm a little disappointed in waiting, but it is what it is. This trade breaks even about 7.5% lower than $112 and 8.5% over $112. Basically, I want to price the short legs at my price targets and have my break-even positions at or beyond where options are pricing an expected move.