Adobe Systems Incorporated (ADBE) is a software company that offers a range of products used by professionals in a number of industries. The company’s stock is currently trading around $79.20 in a 52 week range of $57.15-$80.30. The stock has been very strong this year with shares rallying 9% year to date. ADBE is expected to report their most recent quarterly earnings after the close today.

The stock has been strong on earnings day over the past 8 quarters. ADBE shares have rallied 6 of the past 8 quarters with an average move of 6.9%. Currently the options market is implying a move of around $4.15 by Friday’s close. This would imply an upside or downside move of around 5.2% by March expiration. ADBE is looking very strong on a chart as well with shares trading well above the Ichimoku cloud and value area for the month. With a strong historical bullish bias and a strong technical setup I will be looking to get long ADBE into earnings.

Potential Trade: Buying the ADBE Mar 82.5-85 Call Spreads for $0.50
Risk: $50 per 1 lot
Reward: $200 per 1 lot
Breakeven: $83.00

Since the historical movement is higher than the move implied this time I am willing to get a little more aggressive with my upside target.

The first two weeks of March have given us a rather nasty bout of whiplash. We check futures before bed and theyʼre down. We wake up at 5 and theyʼre up. By the open…

We find some comfort in an extra shot of espresso, but the lack of trend is taking its toll on our sleep. The Dow Jones Industrial Average (DJIA) has closed up or down by triple digits on seven of the last ten trading days. Notably, four of these moves exceeded 250 points.

Despite the gyrations, the CBOE Volatility Index (VIX) is still only 16.6, well below both Januaryʼs rise to 22 and last Octoberʼs spike above 26. In other words, the Chicago based traders who make markets in the S&P 500 Index options, which in turn determine the level of implied volatility, are far less stressed than we are! The trading community is effectively telegraphing a view that the broad market will continue to yo-yo up and down rather than break out in one decisive direction. We may have whiplash, but they clearly do not.

Traders not only embrace volatility, they live for it. Volatility, or “vol” is their lifeblood. It provides opportunities to get in and out, presumably at a profit. We generally take a longer-term view, but we can still borrow a page from their playbook: Trade the range.

We are combing our portfolio for stocks which, like the broader market, are gyrating more than usual. We are looking to make opportunistic options trades, buying calls on down days and puts on up days (if the VIX were higher, we would sell puts on down days and sell calls on up days). Because we are buying options, we generally focus on slightly in-the-money strikes, thereby minimizing both time decay on our P&L and premium paid to the Chicago crowd.

Hereʼs what weʼre eyeing today as the DJIA falls 260 points. Happy trading.

1. BankAmerica April 15 calls at $1.12 stock at $16.00
2. Google April 535 calls at $22.00 stock at $545.00
3. News Corp 16 calls at $0.75 stock at $16.50

Urban Outfitters, Inc. (URBN) is a retailer that offers a variety of apparel and lifestyle products from number of different brands. The company operates over 500 stores in the U.S., Europe, and Canada. The company’s stock is currently trading around $39.07 in a 52 week range of $27.89-$40.67. The stock has been very strong this year with shares rallying over 11% year to date. The stock is also trading very well on a chart with shares trading well above the Ichimoku Cloud but inside of value for the month.

URBN is reporting earnings today after the market close. The stock has a relatively mixed performance record on earnings day. In the past 8 quarters the stock sold off 4 times and rallied 4 times with an average move of 4.6%. With stock at current levels the options market is implying a move of around $2.70 by March expiration. This implies that the stock could rally as high as $41.65 by option expiry. Even though the historical movement is mixed there has been some bullish options activity in URBN ahead of this release. We have seen several large blocks of calls bought in URBN. With the bullish orderflow and relatively bullish chart setup I will be looking for a long position in URBN into earnings.

Potential Trade: Buying the URBN Mar 41-12 Call Spreads for $0.25
Risk: $25 per 1 lot
Reward: Unlimited
Breakeven: $41.25

Finisar Corp. (FNSR) is a California based telecom and network communications device and service provider that operates both domestically and with a significant international presence. At the time of this post (12:10PM CST), FNSR is currently trading at 22.11 up 8.76% on the day. The stock is higher on positive forward guidance that exceeded expectations as a part of yesterday’s Q3 earnings call. With today’s sharp break higher through 22.00 resistance on the daily chart, the stock is currently trading within the upper-middle portion of its 52 week trading range of 14.22-28.85.

Stock is ripping higher today on earnings and it appears that traders believe this trend will continue through April expiration. Earlier today a trader bought 6,668 FNSR Apr 23 Calls for $0.70. This was labeled an opening position and would express a very bullish sentiment in FNSR. With activity this strong and a great earnings release I will be looking for more upside in FNSR.

Trade: A trader bought 6,668 FNSR Apr 23 Calls for $0.70.
Risk: $70 per 1 lot
Reward: Unlimited
Breakeven: $23.70

Yahoo! Inc. (YHOO) is a California based information technology and advertising service provider most well known for its eponymous search engine services. At the time of this post, YHOO is currently trading at 44.17, up 3.71% on the day after earlier rumors of a potential buyout from Alibaba Group hit the street. After today’s move higher, YHOO still remains in the upper-middle portion of its 52 week trading range of 32.15-52.62 as it looks to continue the push higher to re-test 45.00 level resistance on a daily chart.

Earlier today a trader bought 3,569 YHOO Mar 6th Weekly 43.5 Calls for $0.25. The stock was trading around $42.95 at the time of the trade and these calls ripped higher with the stock. These calls have already traded as high as $1.04 today making this trade an absolute blowout winner. These calls expire at the end of the week and are a great example of how even in large cap names order flow in weekly options can be traded for great profits.

Trade: A trader bought 3,569 YHOO Mar 6th Weekly 43.5 Calls for $0.25
Risk: $25 per 1 lot
Reward: Unlimited
Breakeven: $43.75

If a trader would have bought a 20 lot of these calls they would have profited $1,580 at the highs.

The Coca-Cola Company (KO) is an Atlanta based beverage and soft-drink manufacturer and distributor, and currently represents one of the world’s most recognizable brands. At the time of this post (1:30PM CST), KO is currently trading at 43.39, up 2.19% on the day. The stock is currently well within the upper portion of its 52 week trading range of 37.85-45.00, and today’s move higher represents a significant continuation move after yesterday’s bounce off of 42.00 level support on a daily chart.

KO has seen a huge move higher today as we continue to see bullish unusual options activity in the name. Our traders have been following the activity in this name since last week when massive blocks of the KO May 44 calls were bought. Our traders bought these calls and have since seen them double in value. Since then there have been more blocks of calls bought on multiple lines of calls. It seems like institutional traders are speculating on news in KO over the weekend. The stock has also broken above the Ichimoku Cloud and is now trading in bullish territory on a chart. With the improving technical story and the massive order flow in the name we are expecting a lot of upside in KO through the May expiration.

The Coca-Cola Company (KO) markets over 500 beverages around the world. The company’s stock is currently trading around $42.00 in a 52 week range of $37.22-$45.00. KO shares have not moved much this year with stock lower on the year by only 0.57%. Despite the lack of movement in KO this year traders have been extremely bullish the name as we have seen many large blocks of calls being bought in KO. Earlier this morning a trader added to a large position in
KO implying they believe there will be more upside in KO.

Earlier this morning a trader bought 13,914 KO May 44 calls for $0.50. This is call volume 7 times the average call volume in KO. Over 25,000 contracts have now traded on that line and will add to the open interest of over 47,000 contracts. Although KO is trading below the cloud on the daily chart this bullish order flow is too large to ignore. Our traders bought these calls along with other bullish options positions in KO.

Trade: I bought the KO May 44 Calls for $0.53
Risk: $53 per 1 lot
Reward: Unlimited
Breakeven: $44.53

SolarCity Corporation (SCTY) is a designer, fabricator and seller of solar energy systems for both residential and commercial building use. At the time of this post (11:15AM CST), SCTY is currently trading at 58.16, up 0.07% on the day. The stock is currently trading well within the lower portion of its 52 week trading range of 45.79-88.35 and has been unable to break above and trade over the 60.00 level resistance since early October 2014. SCTY is scheduled to report earnings today, 2/1/8/2015 after the market close.

Over the last eight quarters of earnings data available, SCTY has traded predominantly bearishly, moving lower on six out of eight sessions immediately following the EPS release. The average historical move during this same time period was approximately 9.2%, although it may be worth noting that four of the stock’s post-EPS directional moves registered over 10%. Currently the options market is pricing in a slightly lower than average move of 7.5% based on the current pricing of the at-the-money straddle. This would imply a directional move of about $4.40 in the price of the underlying stock by this Friday’s monthly options expiration. SCTY remains above the cloud and most relevant moving averages on the daily chart, but the Ichimoku Cloud is firmly downward sloping, and as previously stated the overall investor sentiment over the majority of the past year has been largely bearish. In conjunction with the propensity of SCTY to trade lower after earnings, I will be looking to establish a short position in this name going into this afternoon’s close.

Potential Trade: Buying the SCTY Feb 56-55 Put Spreads for $0.30
Risk: $30 per 1 lot
Reward: $70 per 1 lot
Breakeven: $55.70

Fossil Group, Inc. (FOSL) is a Texas based consumer fashion accessory designer and manufacturer, with a physical retail presence consisting of over 300 brick and mortar standalone locations and over 200 outlet locations worldwide. At the time of this post (12:20PM CST), FOSL is currently trading at 99.19, up 0.77% on the day. The stock is currently well within the lower portion of its 52 week trading range of 91.84-121.89, and although it has managed to remain above key 95.00 level support on a daily chart, FOSL has been unable to maintain any significant upward traction and remains well below the downward sloping Ichimoku Cloud and most of the relevant moving averages.

Over the last eight quarters of earnings data available, FOSL has traded with mixed results, moving higher and lower equally (four out of eight sessions) immediately following the EPS release. The average historical move during this same time period was approximately 7.7%. FOSL has been drawing some bearish options activity today as traders buy put spreads expiring this week. Earlier this morning large blocks of the FOSL Feb 98-91 put spreads were bought indicating that this trader believe FOSL will close below $91 on Friday. The options market is implying a move of around $8.30 by Fridays close which would give us a downside target around $91.15. With the weakness in FOSL’s chart and the bearish order flow we are seeing in the stock today I will be looking to get short FOSL into the close.

Potential Trade: Buying the FOSL Feb 95-91 Put Spreads for $1.00
Risk: $100 per 1 lot
Reward: $300 per 1 lot
Breakeven: $94.00