Cypress Semiconductor Corporation (CY) is a semiconductor producer based in San Jose, CA. At the time of this writing (11:40AM CST), CY is currently trading at 13.66, up 0.89% on the day and just under 0.10 off of the 52 week high of 13.73 that printed earlier this morning. CY continues to see huge bullish momentum following a December 2nd announcement that its proposed merger with fellow semiconductor and microcontroller producer, Spansion Inc. (CODE), would be moving forward.

Earlier today we saw some very unusual option activity in CY that would indicate traders are positioning themselves for continued upside in this merger-play name. At around 10:30AM CST, an extremely large order in the January ’15 14.0 strike calls crossed the tape, lifting the offer on over 24,000 contracts against a comparably modest open interest of just under 850. This initial opening order represents a cash outlay of approximately $1,063,304 pre-commission, and certainly originates from a trader not short on confidence in the continued upside prospects in CY. Moments later, another smaller order came in and bought up over 1,900 more of the same contracts at an ask price of 0.50 representing another cash outlay of just under $100,00 pre-commission. I am looking to follow the order flow in CY today, and will be getting long this name, looking for more merger-fueled upside over 14 going into the New Year.

Trade: I bought the CY Jan 14 Calls for $0.50
Risk: $50 per 1 lot
Reward: Unlimited
Breakeven: $14.50

Adobe Systems Inc. (ADBE) is a San Jose based software company that operates primarily in the digital media and marketing segments of the application software industry. Adobe software solutions are offered direct to individual and business consumers through a network of distributors, authorized retail resellers and direct download via web and mobile stores. At the time of this writing (10:40AM CST), ADBE is currently trading at 70.77, up 1.32% on the day. The stock is currently well within the upper portion of its 52 week trading range of 53.93-74.69, and has found support around 70.00 on the daily chart after re-testing and pulling back off of the year’s highs earlier this month. ADBE is set to report earnings today, 12/11/2014 after the market close.

Over the last eight quarters of earnings data, ADBE has traded resoundingly bullishly, moving higher on six out of eight sessions immediately following the EPS release. The average historical directional move during this time period has been about 6.5%. The options market is currently pricing in a slightly larger post earnings move of 7.65% this quarter, an implied move of about 5.45 in the underlying stock by the monthly option expiration on 12/20/2014. Technically, as mentioned before, ADBE remains extremely strong, rebounding over ten points since mid-October, and finding support above 70.00 on the daily chart. Additionally, ADBE remains above the upward sloping Ichimoku Cloud and just under the associated relevant moving averages. Considering ADBE’s propensity to react bullishly after earnings, coupled with the strong technicals, I am leaning bullish ADBE and will be looking to establish a long position going into this afternoon’s earnings release.

Ciena Corporation (CIEN) is a Maryland based telecommunications equipment and service provider, focused primarily on providing networking solutions to various large scale business enterprises. At the time of this post (11:25AM CST), CIEN is currently trading down 2.1% to 17.22 on the day. CIEN stock is currently trading in the bottom portion of its 52 week range of 13.77-27.16 after holding and bouncing off of the yearly lows that printed in mid-October. CIEN has remained in a downtrend for much of the calendar year after briefly piercing the 52 week highs following the company’s Q1 earnings report in early March of this year. In the near term (over the last two months) CIEN share prices have momentarily stabilized, and the stock looks to break upward consolidation and continue a strong bounce going into the fourth quarter earnings release on 12/11/2014 in the premarket.

Over the last eight quarters of earnings releases, CIEN has traded with mixed to bullish results, moving higher on five out of eight sessions immediately following the EPS release. CIEN has been a volatile post-earnings mover during this time period, posting an average historical move of 11.1%. Currently the options market is pricing in a move that would be right in line with this expectation, as the $1.90 expected move in the underlying stock by this Friday’s expiration would represent a directional move of 11.01%. Despite the technical downtrend for most of the year in CIEN, the stock has recently begun to consolidate bullishly and break out of the Ichimoku Cloud on the daily chart. This recent stabilization and uptrend in share prices, combined with the historical proclivity of CIEN to trade bullishly following its earnings releases has me leaning bullish this name going into earnings. I will be looking to establish a long position in CIEN before today’s close.

Lululemon Athletica Inc. (LULU) is a Vancouver based designer, creator and retailer of activewear and athletic apparel for men and women. LULU is perhaps most well known for its highly popular line of women’s yoga apparel, and delivers all of its products to end customers through its network of international brick and mortar retail locations, its corporate website, and selective distribution to various yoga studios and fitness clubs. At the time of this article’s writing (10:30AM CST), LULU is currently trading at 47.90, up 0.36% on the day. The stock is currently trading in the lower portion of its 52 week range of 36.26-69.62, and is still down over 20% from this time last year, even after bouncing off of the yearly lows that printed in early June. LULU is set to report earnings tomorrow morning, 12/11/2014 before the market open.

Over the last eight quarters of earnings, LULU has traded with mixed results, closing higher or lower evenly, four out of eight sessions following the EPS release. LULU has been a volatile post-earnings mover during this period of evenly distributed investor-sentiment reactions, posting an average historical move of 9.9%. The options market is currently pricing in a move that is fairly in line with this historical average, preparing for about a 9.6% move in LULU by this Friday’s weekly expiration, representing what would be about a $4.60 change in the price of the underlying stock. Despite being down on the year, the recent technical trend in LULU has been largely bullish over the last two months, maintaining a consistent uptrend after testing the 40.00 support level in early October. LULU’s daily chart is also pointing to a bullish continuation, as the stock price remains above the relevant moving averages and well over the upward sloping Ichimoku Cloud. For these reasons I will be looking to establish a bullish position in LULU going into tomorrow’s earnings report.

Trade: Buying the LULU Dec 12th Weekly 51-52 Call Spreads for $0.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Breakeven: $51.25

Krispy Kreme Doughnuts, Inc. (KKD) is a confectionery retailer based in North Carolina that is most well recognized for its chain of brick and mortar donut stores. As of the writing of this article (12:30PM CST), KKD is currently trading up 0.70% on the day to 20.22. The stock is in the upper portion of its 52 week trading range of 14.82-21.30 after rallying hard since printing the annual lows in early August. KKD is scheduled to report earnings today, 12/9/2014 after market close.

Over the last eight quarters of earnings for KKD, the stock has traded relatively bearishly, moving lower on five out of eight sessions immediately following the EPS release. KKD has also been a fairly volatile mover during this time period, registering an average historical move of 12.8%, and notably moving over 20% on three occasions. The options market is currently pricing in a relatively tame earnings reaction this quarter, anticipating just a 10.25% move by the December monthly expiration on 12/20/2014. This would represent a $2.05 directional move in the underlying stock in just over eight trading days. Despite KKD’s rebound off lows that began in the summer, I am leaning bearish on the name going into earnings. From a technical standpoint the stock has stalled out and reversed clearly off 21.00 resistance on the daily chart. Additionally the stock has begun to break down through the relevant moving averages, moving lower towards the Ichimoku Cloud. Going into this afternoon’s EPS release I will be looking to position myself short KKD in anticipation of a continuation of this recent bearish trend.

Trade: Buying the KKD Dec 20-19 Put Spreads for $0.30
Risk: $30 per 1 lot
Reward: $70 per 1 lot
Breakeven: $19.70

Toll Brothers Inc. (TOL) is a luxury home designer and builder based out of Pennsylvania. The company also draws revenue from its ownership and operation of various golf courses and country clubs tied in with its suburban luxury home developments. At the time of this post (10:30AM CST), TOL is currently trading at 34.80, up 0.58% on the day. The stock is within the upper half of its 52 week trading range of 28.98-39.95, and has rebounded well off of the yearly lows printed in early October. TOL is scheduled to report fourth quarter earnings pre-market tomorrow, 12/10/2014.

Historically over the last eight quarters of earnings reports from TOL, the stock has traded with mixed to negative reactions, moving lower five out of eight sessions immediately following the EPS release, with an average historical post-earnings directional move during this time period of 2.7%. Currently the options market is pricing in a slightly larger than average move of about 4.60% based on the current pricing of the ATM straddle. This anticipated move by this week’s weekly options expiration would impute a move up or down of around $1.60 in the underlying stock. Despite historically mixed to bearish investor reactions to TOL earnings reports over the last eight quarters, I will maintain my bullish bias on the name going into the report tomorrow. Toll Brothers released positive preliminary numbers on November 10th, indicating increases in both revenues and future orders. Additionally from a technical standpoint, the stock remains in a bullish consolidation pattern on the daily chart, well above the upward sloping Ichimoku Cloud and all relevant moving averages. Bullish lean intact, I will be looking to get long this name into earnings tomorrow morning.

Trade: Buying the TOL Dec 12th Weekly 35.5-36.5 Call Spreads for $0.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Breakeven: $35.75

AutoZone, Inc. (AZO) is a US based distributor and retailer of auto parts and accessories that sells both through brick and mortar locations across the country and also online via its website. The company also creates and sells automotive diagnostic software that is available under its ALLDATA subsidiary name. At the time of this post (10:30AM CST), AZO is currently trading at 583.27, down 0.80% on the day. The stock printed its 52 week highs of 594.53 off the open today, and even after selling off some going into earnings tomorrow morning, this name appears firmly entrenched in bullish territory, just off the highs for the year and in a strong uptrend off of the 500.00 support level that held in mid-October. AZO is set to report earnings pre-market tomorrow, 12/9/2014.

Over the last eight quarters of earnings data available, AZO has traded with mixed results, moving higher and lower evenly (four of eight quarters), with an average historical directional move of 2.7%. The options market is currently pricing in a move of around 4.25% by December expiration, representing what would be a move of $24.60 in the underlying stock by 12/20/2014. While historically the investor reaction following AZO earnings reports has been mixed, the bullish momentum that is evident in this name via the upward sloping Ichimoku Cloud and continued buying well above all relevant moving averages on a daily chart creates a convincing argument for a sustained move higher before December expiration. I will be looking to get long this name into the earnings release tomorrow.

Trade: Buying the AZO Dec 590-600-610 Call Fly for $1.70
Risk: $170 per 1 lot
Reward: $830 per 1 lot
Breakeven: $591.70 and $608.30

Ensco plc (ESV) is a London based oil and gas drilling and exploration company, and currently the world’s second largest offshore driller by total fleet size. As of the writing of this article (10:30AM CST), ESV is currently trading lower on the day, down 3.37% to 30.40. The stock printed 52 week lows earlier in the session, as the decline in oil prices to levels not seen in around four years continues to drag down the stock price of offshore drillers. ESV is down over 50% from its trading levels of around the 60.00 at this time last year.

As ESV, much like crude prices at large, has been firmly entrenched in a strong and seemingly unending downtrend for most of this year, it should come as no surprise that we saw some extremely bearish unusual options activity in the name today. Earlier this morning we saw a large buyer of the Jan ’15 26 Puts step in and buy 2,471 contracts at the offer for $0.45, and another 1,939 contracts around 35 minutes later for $0.60 for a total cash outlay of $237,535 before commission costs. Based on the open interest of just 337 contracts we know this was an opening transaction, looking to profit on what would be over a 10% further decline in the stock price by the January ’15 monthly expiration. As both the ESV stock and global oil prices have yet to make any real indication that they can cease hemorrhaging at current rates, I am inclined to lean bearish with the large put buyer from this morning.

Trade: I bought the ESV Jan 26 Puts for $0.475 on Average
Risk: $47.50 per 1 lot
Breakeven: $25.525

Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA) is a retailer that offers consumers salon products and services in retail stores. The company’s stock is currently trading around $124.30 in a 52 week range of $80.35-$129.47. The stock has been very strong this year with shares rallying nearly 29% year to date. The company is set to report earnings after the bell today with analysts expecting EPS of around $0.83 on $711 million in revenue.

ULTA has been strong on earnings day over the past 8 quarters with shares rallying 6 times on earnings day. On average the stock moves around 14.3% on earnings day and this time around the options market is implying a move of around $13.35, or around 10.7%, by December expiration. ULTA is also looking strong on a chart with shares trading well above the Ichimoku Cloud. The stock also caught a round of upgrades earlier this week ahead of their earnings tonight. With a strong technical setup and strong historical track record I can’t justify anything but a long in ULTA. Using the options market to calculate an upside target I will be looking to get long ULTA with an upside target of $137.65

Trade: Buying the ULTA Dec 130-135 Call Spreads for $1.50
Risk: $150 per 1 lot
Reward: $350 per 1 lot
Breakeven: $131.50

American Eagle Outfitters, Inc. (AEO) is an apparel and accessory retailer that operates approximately 1,000 brick and mortar retail locations primarily within the US, with additional but less significant presence in Mexico, Canada, China and Hong Kong. The company’s primary consumer demographic is young men and women in the 15-25 age range, and as such is a direct competitor with similar retailers Abercrombie & Fitch (ANF) and Aéropostale (ARO), both of which also reported earnings earlier this week. At the time of this post (10:15AM CST), AEO is currently trading down to 13.80, a move lower of 3.90% on the day. AEO is currently trading just over the mid point of its 52 week range of 10.12-16.50, and is set to report earnings today, 12/4/2014 after the market close.

Over the last eight quarters of earnings data available, AEO has reacted primarily bearishly in the trading sessions immediately following earnings, trading lower five out of eight times after the EPS release. The historical move during this period was 7.2%, but it may be worth noting that three of the five one-day moves lower have been of a magnitude of at least -9.5%. The options market is currently pricing in a move of around 10.18% based on the ATM straddle in AEO, reflecting what would be a $1.40 move in the underlying stock by this Friday’s weekly expiration. Part of the reasoning for this expected volatility may be related to the earnings of previously mentioned competitors ANF and ARO, the latter down over 25.24% on today’s session following a very negative earnings reaction from investor response to another quarter of losses and missed expectations. ANF is also down over 4.5% on the session after initially trading higher following its EPS release the previous day. Although American Eagle has managed to hold and rebound off of its lows in late May and early June, the teen apparel market seems to be having a very tough time maintaining any traction in recent quarters, and I am inclined to maintain my bearish lean on AEO going into their report this afternoon.

Trade: Buying the AEO Dec 5th Weekly 13.5-12.5 Put Spreads for $0.28
Risk: $28 per 1 lot
Reward: $72 per 1 lot
Breakeven: $13.22