Texas Instruments Inc. (TXN) designs, makes and sells semiconductors to electronic designers and manufacturers across the world through two segments: Analog and Embedded Processing. The stock is currently trading around $49.22 at the middle of its 52 week range of $41.47-$59.99. The stock has been under performing the market this year dropping 7.93% year to date. TXN is scheduled to report earnings after the closing bell today, and the stock is down $1.01 or 2.05% on the session ahead of the close.
Over the past 12 quarters TXN has rallied on earnings day 7 times with an average move of 2.83%. The stock appears bearish on a chart going into the release having traded below the Ichimoku Cloud for the last few months since late April on the daily bars. Over the past 12 quarters TXN has rallied from earnings to the nearest options expiration 5 times with an average move of 3.69%. The stock looks as if it could drop to the downside further in today’s session following the recent bearish trend. Investors are expecting to see how the company performs after delivering poor earnings numbers last quarter taking a huge hit from strong currency headwinds. Considering a strong USD, weak technical data, and poor earnings performance in the past it is hard to justify anything, but a short position on TXN
The options market is currently implying a move of around $2.01 or 4.1% in TXN by this Friday’s close giving us targets of $47.21 and $51.23.
Trade: Buy this week’s 48-46.5 Put Vertical spread for $0.33
Risk: $33 per lot
Reward: $117
Break-Even: $47.67