Freeport-McMoRan Inc. (FCX) is a natural resources company based in the U.S. with assets around the world. The company’s stock is currently trading around $23.58 in a 52 week range of $20.94-$39.32. The stock has been massively under-performing the market this year with shares falling over 37% year to date. Traders are expecting this weakness in FCX to continue through the beginning of the New Year as we have seen some very bearish options activity in FCX during today’s session.

Earlier today a trader bought 3,223 FCX Feb 20 puts for $0.43. Nearly 12,000 contracts have now traded on that line and FCX is lower from where it was when the puts were bought. This is a very bearish trade and has a breakeven below the stocks 52 week low. FCX is also trading below the Ichimoku Cloud meaning that it is still in technically bearish territory. With a weak chart and large blocks of bearish positions coming across the tape I think that FCX sets up well for a short here.

Trade: I bought the FCX Feb 20 puts for $0.42
Risk: $42 per 1 lot
Breakeven: $19.58

Consumer Staples Select Sector SPDR Fund (XLP) is an ETF that seeks to provide returns in line with a consumer staples sector index. XLP is currently trading around $49.21 in a 52 week range of $39.83-$49.63. The fund has been outperforming the broader market this year with shares rallying more than 14.5% year to date. Despite this strong performance some traders are establishing some very bearish positions in today’s session.

Earlier this morning a trader bought 9,968 XLP Feb 48 Puts for $0.54. This is a very large order that has this trader risking nearly $540,000 through Feb expiration. Although XLP looks very strong on a chart this order is very large and likely represents this trader’s belief that XLP has become overbought. This trade has a good risk vs. reward setup so I elected to buy some of these puts.

Trade: I bought 200 of the XLP Feb 48 puts for $0.55
Risk: $55 per 1 lot
Breakeven: $47.45

Seagate Technology Public Limited Company (Nasdaq: STX, $67.91) has outperformed the overall tech sector in 2014, with shares having risen 20.5% year to date versus 17.8% for the sector overall.

STX shares have traded in a 52-week range of $48.21-$69.42, with 2.8 million shares changing hands each day on average. STX hit it’s all-time high of $69.40 one week ago on December 23.

At least one trader has a high level of conviction STX will carve out new highs before week’s end. With just over an hour left in Monday’s session, we saw a trader come in and buy 3,000 STX Jan Weekly 67.5 Calls expiring this Friday for $1.14 with stock trading $68.31. An opening position, this represents a $342,000 outlay in long premium with the potential to control 300,000 shares of stock should these calls be in-the-money at Friday’s expiration.

Since this trader bought these calls, STX has sold off and these calls are trading about $0.80. True believers in unusual options activity might use this sell-off as an opportunity to follow along at a lower price.

Best Buy Co., Inc (BBY) is an international tech retailer based in Richfield, MN that operates just under 2,000 brick and mortar locations across the US, Canada, Mexico and China. At the time of this post (12:55PM CST), BBY is currently trading down 1.34%, to 38.62 on the day. The stock continues to push the 40.00 level resistance on the daily chart, but has thus far been unable to break higher with any conviction after breaking lower through this level and eventually gapping down hard in mid-January of 2014.

Earlier this morning, we detected and flagged some unusually bullish options activity in the BBY Feb ’15 40.0 calls as a large buyer stepped in and bought a huge lot of over 8,500 contracts against an open interest of just 264. This purchase went off above the ask for $2.09, and in conjunction with the open interest statistics, we can be confident that this was an opening long transaction. It would appear that a confident buyer anticipates Best Buy will be able to finally break above key 40.00 resistance going into the second month of the New Year, and the initial block purchase of over 8,500 contracts represents a cash outlay of approximately $1,794,265 before commissions. As of this post over 10,800 of the Feb ’15 40.0 calls have traded on the day.

Trade: A trader bought 8,585 BBY Feb 40 Calls for $2.10
Risk: $210 per 1 lot
Reward: Unlimited
Breakeven: $42.10

Walgreen Co. (WAG) is a Deerfield, IL based operator of over 8,200 nationwide brick-and mortar Walgreen’s drug stores that provide retail goods, pharmacy and health-and-wellness services. At the time of this post, (12:00PM CST) WAG is currently trading at 73.74, up 0.70% on the day. The stock is currently well within the upper portion of its 52 week trading range of 55.27-76.39, and is set to report earnings before the open tomorrow, 12/23/2014.

Over the last eight quarters of earnings data available, WAG has traded mostly bearishly, moving lower five out of eight sessions immediately following the EPS release. The average historical move during this same time period was 2.9%. Currently the options market is pricing in an implied move of approximately 2.64% or $1.95 in the underlying stock by this Friday’s 12/26/2014 weekly expiration, which would be well within the expected historical range. WAG is currently trading under 75.00 resistance on the daily chart after this level held firmly twice in early and mid June and rejected the uptrend again last week. Perhaps most worrisome is that the stock was unable to break through and trade above this level despite massive broad-market strength last week that saw most individual stocks ripping higher. As WAG has demonstrated an inability to trade higher despite favorable market conditions, I am currently leaning bearish this name and will look to establish a short position going into earnings tomorrow.

Trade: Buying the WAG Dec 26th Weekly 72.5-71.5 Put Spreads for $0.30
Risk: $30 per 1 lot
Reward: $70 per 1 lot
Breakeven: $72.20

Oracle Corporation (ORCL) is a longstanding California based software, database management and enterprise services provider, and currently the world’s second largest software producer by total revenue. As of this post (12:20PM CST) ORCL is currently trading up 0.82% to 40.97. The stock remains in the upper portion of its 52 week range of 33.70-43.19, and has begun to pull back off of 42.00 resistance on the daily chart after failing to re-test the year’s highs that were printed back in late June. ORCL is currently set to report earnings today, 12/17/2014 after the market close.

Over the last eight quarters of earnings data available, ORCL has traded mostly bearishly, moving lower on five out of eight sessions immediately following the EPS release. Historical volatility in ORCL has been relatively modest on these post-earnings moves, averaging approximately 4.7% during this time period. Currently the options market is pricing in a slightly larger than average directional move of approximately 5.95%, or roughly $2.40 in the underlying stock by this Friday’s monthly option expiration on 12/19. Although ORCL is currently above the Ichimoku Cloud on the daily chart, the stock remains in a downward consolidation pattern and has been unable to hold convincingly over 42.00 resistance or the relevant moving averages. Coupled with Oracle’s recent propensity to trade lower following earnings, including selling off each of the last three consecutive quarters, I will be looking for a continuation in the bearish trend and looking to get short this name into today’s earnings release.

Trade: Buying the ORCL Dec 40-39 Put Spreads for $0.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Breakeven: $39.75

Finish Line Inc. (FINL) is an Indianapolis based sports and athletic apparel retailer that operates approximately 850 brick and mortar locations across the continental US. Finish Line also sells direct to consumer via its multiple online presences. At the time of this post (11:40AM CST) FINL is currently trading at 28.10, down a modest 0.14% on the day. Despite gapping down considerably off of the 52 week highs following last quarter’s earnings report in late September, FINL has recovered well and is currently trading back in the upper half of its 52 week range of 22.99-31.90. The stock has remained in consolidation around the 28.00 price level since early December, but will look to break out of this tight range following the fiscal year Q3 earnings release on 12/19 before the opening bell.

Over the last eight quarters of earnings data available, FINL has traded largely bullishly, moving higher six out of eight sessions immediately following the EPS release, with an average historical post-earnings move of 6.5% during this same time period. It appears as though the options market is currently prepared for another outsized move following last quarter’s -14.9% earnings reaction, as the current ATM straddle price would indicate an implied directional move of somewhere between 10-20%, or over $5.00 in the underlying stock by this week’s monthly expiration on Friday 12/19/2014, the same day as the EPS release. As previously mentioned, FINL has rebounded well after last quarter’s post-earnings sell off, and currently the stock remains in a tight bullish consolidation pattern over the Ichimoku Cloud and all relevant moving averages on the daily chart. Looking at Finish Line’s recent historical tendency to trade higher after earnings, in conjunction with the bullish technical setup, I am currently leaning bullish in FINL and will be looking to get long this name into earnings this Friday.

Trade: Buying the FINL Dec 25-30 Call Spreads for $3.00
Risk: $300 per 1 lot
Reward: $200 per 1 lot
Breakeven: $28.00

FedEx Corporation (FDX) is an international shipping, freight and business solutions provider based in Memphis, TN. At the time of this post (10:30AM CST), FDX is currently trading at 176.81, up 0.31% on the day. FDX is currently trading comfortably within the upper portion of its 52 week range of 128.17-183.51, and has remained in a strong uptrend for most of the year after gapping up over key 140 resistance on the daily chart following a positive fiscal year Q4 earnings reaction in late June. FDX stock is just one week removed from its printing 52 week highs on 12/8/2014, and the company is set to report fiscal year Q2 earnings tomorrow, 12/17/2014 before the opening bell.

Over the last eight quarters of earnings data available, FDX has traded overwhelmingly bullishly following earnings, moving higher on six out of eight sessions immediately after the EPS release. Volatility in FDX has been fairly modest post-earnings during this time period, with an average historical move of just about 3.0%. Currently the options market is pricing in a slightly larger than average move of approximately 4.36% following tomorrow’s earnings report based on the price of the ATM straddle. This percentage move would represent about a $7.75 change in FDX share prices by this week’s Friday expiration on 12/20/2014. As mentioned previously, FDX has remained in a very strong, bullish uptrend for the large majority of this year, and I am anticipating a continuation of this trend following tomorrow’s earnings release. In addition to the 52 week trend, FDX remains strong in the near term as well, trading well above the upward sloping Ichimoku Cloud and several relevant moving averages on the daily chart. Considering this ongoing bullish trend, I will be looking to get long this name before the close.

Trade: Buying the FDX Dec 180-185 Call Spreads for $1.35
Risk: $135 per 1 lot
Reward: $365 per 1 lot
Breakeven: $181.35

General Mills, Inc. (GIS) is a Minnesota based consumer processed and packaged foods manufacturer with both domestic and international distribution networks. At the time of this post (11:50AM CST), GIS is currently trading at 51.95, up 0.85% on the session. GIS has bounced around its 52 week trading range of 46.70-55.64 for most of the year, and currently sits just about in the middle of this relatively narrow range. GIS is scheduled to report earnings tomorrow, 12/17/2014, before the bell, and will be looking to buck its recent bearish trend after selling off -3.6% and -4.4% the last two quarters respectively following its earnings releases.

Despite the last two quarters of bearish post-earnings reactions, GIS has been evenly mixed overall the last eight quarters, trading higher and lower equally four out of eight times immediately following the EPS release. The average historical move during this time period has likewise been fairly unremarkable, with a directional average move of just 1.7%. Currently the options market is pricing in an large relative move of between 3-6% based on the pricing of the ATM straddle. These currently inflated volatility levels in the GIS options would appear to create an opportunity to capitalize on a neutral strategy that would benefit from a smaller than anticipated move in the options that have just over three days to expiration on this Friday, 12/20/2014. GIS has found some Ichimoku Cloud support on the daily chart, but still remains below most of the relevant moving averages and firmly entrenched in the choppy, sideways trading action that has characterized most of 2014 for the stock. I am not anticipating any significant change in character in GIS following tomorrow’s earnings release, and will therefore be looking to structure a neutral trade that will allow me to benefit from what I believe to be a lackluster reaction in conjunction with an overly priced-in move in the options.

Trade: Selling the GIS Dec 47.5-50-52.5 Iron Butterfly for $1.95
Risk: $55 per 1 lot
Reward: $195 per 1 lot
Breakeven: $48.05 and $51.95

VeriFone Systems, Inc. (PAY) is an IT services and consulting firm engaging in electronic payment solutions. The stock is currently trading around $33.00 in a 52 week range of $22.60-$38.26. The stock has been outperforming the market this year with shares rallying more than 23% year to date. The company is set to report earnings after the bell today.

PAY has been relatively strong on earnings day with shares rallying 5 of the past 8 quarters with an average move of 9.8% on earnings day. PAY is currently trading inside the Ichimoku Cloud meaning it is in neutral territory. The options market is currently implying a move of $2.50 by expiration. With the neutral chart setup I am looking to fade the move in PAY on earnings. I cannot sell a straddle because I do not want to risk blowing out my account. Instead I will look to use a strategy called an iron butterfly.

Trade: Selling the PAY Dec 30-33-36 Iron Butterfly for $2.00
Risk: $100 per 1 lot
Reward: $200 per 1 lot
Breakeven: $31.00 and $35.00