Biogen (O:BIIB) reports earnings Wednesday morning before the market opens. The stock had been one of the darlings of the healthcare space as it rose over 850% from a base near 50 in 2010 to its peak 480 nearly a year ago. But it has not caused such great excitement recently. After a quick drop to $300, the stock has been moving lower in a channel, as shown in the chart, since August. Now off nearly 50% from the all-time high, it is continuing lower into earnings.
The RSI is running flat in bearish territory just above oversold levels, as the MACD continues lower. These support more downside in the price. There is support lower at 255 and then you need to look back to a gap to fill to 253.22 from November 2013, with 230 and 223 followed by 205 as possible support after that. There is resistance above at 275 and 291 before 300. Short interest is low at 1.2%.
The reaction to the last 6 earnings reports has been a move of about 9.95% on average or $26 making for an expected range of 234 to 287. The at-the money January 29 Expiry Straddles suggest a smaller $17.75 move by Expiry Friday with Implied Volatility at 89% above the February at 43%. Open interest is largest at the 275 Strike this week, with most of it on the Put side. There is big activity on the Put side today at the 240 Strike with a block of nearly 1600 trading on the bid. Call open interest is much lighter than both of these but all above the current price.
- Trade Idea 1: Buy the January 29 Expiry 262.5/272.5 1×2 Call Spread for $0.50.
- Trade Idea 2: Buy the January 29 Expiry 262.5/272.5/282.5 Call Butterfly for $2.50.
- Trade Idea 3: Buy the January 29 Expiry 262.5/272.5/282.5 Call Butterfly and sell the January 29 Expiry 240 Put for 45 cents.
- Trade Idea 4: Buy the January 29 Expiry 260/240 1×2 Put Spread for $4.00.
- Trade Idea 5: Sell the January 29 Expiry 240/285 Strangle for a $3.45 credit.
#1, #2 and #3 look for a move higher but not to exceed 280, following options open interest. #1 is profitable from 263 to 282, while #2 makes money between 265 and 280. #3 adds leverage to the butterfly increasing the profitable range to 262.95 to 282.05. #4 follows the chart lower with leverage and is profitable between 256 and 224 Friday. #5 looks both ways and uses the big open interest at 240 as well as the historical range to 285 as bounds. It is profitable between 236.55 and 289.45 Friday.