Skechers U.S.A., Inc. (SKX) is scheduled to report earnings after the markets close on Thursday, 4/21/16.
Last quarter, the stock had the following price movement after reporting earnings:
Feb 11, 2016
Feb 10, 2016
The Implied Volatility (IV) on the weekly April Week 4 expiration at-the-money strike is a extremely high 301.69, compared to the May 2016 at-the-money strike of 66.77. Clearly, there is a big price move expected in relation to the share price. I don’t think it happens. Just as last quarter, the stock really didn’t move too much, and while I expect it to do more than that this quarter, a trader has to take advantage of past history and an elevated IV level as this trade has, which will again be a Neutral Calendar Spread. This trade, as mentioned, has weekly options, is priced very good, and a lot of factors working in its favor. It will also hold value very well even in the event it moves more than expected post-earnings. I am giving this trade a 10/10. A must trade.
Here is how the trade is placed:
Sell -75 SKX AprWk4 30 Call
Buy 75 SKX May16 30 Call
Greeks / NBBO
NBBO 0.25 – 0.50. Try to pay 0.38 or less for this trade. At a maximum, pay up to 0.41.
See the attachment for the profit/loss chart.
Update 1: 4/22/16, 9:20 am EST: Pre-market, the stock is up $2.20/share. I am placing the price to close this trade out (net credit) at 1.00. I will update any changes here, if needed.
Update 2 9:34 am EST: : Price to close this trade out now at 0.85.