Earnings have stayed steady over the last four quarters, within a range of $0.28 to $0.30 cents. Analysts expect the trend to continue, projecting $0.29 for Q2 and $0.30 for Q3. Overall, 2012 beat estimates by 2% and were up $0.29 from 2011. 2013 earnings are expected to advance $0.09 from 2012, to $1.19. Forbes Magazine rates Red Hat the 4^th most innovative company in the world. The company spends 2.5% of its revenue on research and development. Revenue for 2012 was up 24.6% from 2011, to 1.13 Billion.

RHT is down $0.60 for the day, about 1%, trading between 56.73 and 57.81. The 52-week range sits between 37.82 and 62.75. RHT hit a high in the beginning of May, fell almost $12 by June and has been trending higher in a volatile fashion. The market cap is 11.01B. The stock is close to its all time high, not counting a 2-1 split pre-millennium.  Tech sector is down almost 1% on the day, with Red Hat’s major competitors all down slightly. 

The ATM 57.5 straddle is currently priced around $6.00.  This is implying a $6.00 move in either direction, or a 10.5% move.  This gives us an upside measure move target near $63.00. The open interest is highest in calls at the 62.5 and 67.5 strike prices. 

Trade: Buy Oct 60-65-70 Call Fly for 0.75

Risk: $0.75

Reward: $4.25

Break Even: 60.75 and 69.25

Strategy: If I get a nice move I will generally take off half and let the rest ride to expiration.

Paper bought 13,081 FRX Jan 2013 41 Calls for $.35 (16.7 times usual volume) when stock was trading $36.20

Paper bought 5650 AVP Nov 18 Calls for $.35 (5.4 times usual volume) when stock was trading $15.84

Paper sold 1571 PKG Oct 35 Puts for $1.20 (5.4 times usual volume) when stock was trading $34.91

This event is scheduled to start on Friday, September 21 2012 at 1:30 PM (US/Central)

Clink the picture to enter the webinar.

Dow futures are up even further today to 13,548, a gain of 33 points, while S&P futures have gained about three points on the day. Crude futures and metal futures all up; gold is up 10 and oil is up 0.75 points. 

The euro/USD rose today about a third of a penny on news from Spain that a bailout may be in order in the near future. Spain is considering freezing pensions and raising the retirement age to cut spending under the plan agreed upon in an aid agreement.

Apple’s iPhone store release today pushed AT&T (T| $38.46) higher about 1.34% for the day. AT&T’s 52-week range is about $11 with a low and high of $27.41 and 38.58. AT&T hit the low in July, bounced up almost to its 52 week high and has stayed relatively steady sitting between $37 and $38. Apple has been performing headcounts at every store for those lined up to buy the iPhone 5 and they are now suggesting record sales for the new phone. Apple hit another new all-time high today at $705.07 but bounced back down to $703 after noon, CST.

Starbucks (SBUX | $51.43) is up about 0.28% on announcements that they will be selling electronic brewers and a new single serve coffee line. Starbucks is ten dollars short of its 52 week high, the range being $35.12 to $62.00. Starbucks is up $3 since Monday.

Alex Kalish has a master’s degree in economics from Suffolk U.

Questions, comments and suggestions welcome: alexk@keeneonthemarket.com