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Free Trade of the Week: Darden Restaurants, Inc. (DRI) – Earnings Trade- Reports before the markets open 12/19/13

Darden Restaurants, Inc. (DRI) – Earnings Trade- Before the markets open 12/19/13 DRI NCS 121913

Darden Restaurants, Inc. (DRI) is scheduled to report earnings before the markets open on Thursday, December 19, 2013.

Last quarter, the stock did very little at the open from the previous days close. It did drop a decent amount at one point, but nothing too significant. I am expecting the same this time. This stock has always had overpriced options before they report earnings trades, and a Neutral calendar Spread takes advantage of those. The Implied Volatility on the expiring December 2013 strike price (expires this Friday) is almost 3X that of the January 2014 strike price. Last quarter , the stock had the following price movement:

Sep 20, 2013 47.47 47.83 45.72 45.78 6,344,400 45.23
Sep 19, 2013 49.78 49.80 48.92 49.30 1,851,100 48.71

This trade is also extremely inexpensive to place. It should profit immediately. A solid 9/10 trade, with an excellent ROI %. Here is how the trade is placed:

Entered Trade

Sell -20 DRI Dec13 52.5 Call
Buy 20 DRI Jan14 52.5 Call

Requirements

Cost/Proceeds $500.00
Option Requirement $0.00
Total Requirements $500.00
Estimated Commission $60.00

Greeks / NBBO

Symbol Bid Ask IV Delta Gamma Vega Theta
DRI Dec13
52.5 Call 1.45 1.55 95.34 -1,035.95 -214.99 -31.00 740.22
DRI Jan14
52.5 Call 1.70 1.80 33.14 961.69 161.35 118.77 -66.88
Net -74.26 -53.64 87.77 673.34

NBBO 0.15 0.35. Try to pay 0.25 or less for this trade, and up to 0.30 to ensure you get in. See the attachment for the profit/loss chart.

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One Response to Free Trade of the Week: Darden Restaurants, Inc. (DRI) – Earnings Trade- Reports before the markets open 12/19/13

  1. KOB says:

    Trade closed at $0.50

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