Sohu.com Inc (SOHU) is a China based online search and mobile service group. The stock is currently trading around $82.70 in a 52 week range of $34.84-$87.29. The company is set to report their most recent quarterly earnings on Monday. SOHU is historically not a strong stock on earnings day. Over the past 8 quarters the stock has sold of 6 times on earnings day with an average move of 8.7%. The options market is currently implying a move of $9.40 (11.37%) higher or lower by November expiration. Despite the stock’s poor performance on earnings day we have seen SOHU substantially outperform the broader market this year, rallying over 75% year to date. SOHU is trading very well on a chart with shares trading well above the Ichimoku Cloud. Even though the stock has been strong this year we do not want to be getting long ahead of earnings. The weak historical earnings performance provides us with a set up for a short into the announcement.
Trade: Buying the SOHU Nov 75-72.5 Put Spread for $0.80
Risk: $80 per 1 lot
Reward: $170 per 1 lot
Breakeven: $74.20
