Event: AXP reports their Q4 results tomorrow before the open, the options market is implying a one day move of about 2.6% which is essentially inline with the 4 qtr average move of about 2.7%
Price Action /Technicals: The stock has under-performed year to date, down about 3.25% vs the XLF, of which it is the 6th largest component, which is up 1.25%.
The 6 month chart below shows near term support at about $85, just below its 50 day moving average, while the stock could see some resistance on the upside at the previous all time high made on Jan 1st at about $91.
Sentiment: Despite the stock’s monster year in 2013, and recently making new all time highs, Wall Street analysts are fairly mixed on the stock with 11 Buys, 17 Holds and 4 Sells with an avg 12 month price target of $88.75, or about 1% higher than current levels.
Implied Volatility Snapshot: On a historical basis IV is fairly low for its set up into the earnings announcement, below 20, usually it gets to at least the low 20s and then drops back to the mid teens after the event.
Options Open Interest: For such a large cap stock, AXP options are not that actively traded among institutions with a total of 233,000 of total options open interest, 142k puts and 91k calls. The largest single lines are: 17k Jan15 65 puts, 17k Jan15 85 calls, 7k jan 45 puts, 7k jan 55 puts and 6k Jan 60 puts. Of those lines the most interesting looks like Jan 15th, where it looks like back in August a trader made a very bullish bet by selling the Jan15 65 Put and buying the Jan15 85 call that is now in the money (read here).
Our View: Options are probably a bit cheap for the event considering what is at stake technically. The at-the-money straddle for Jan expiration is priced for a 2 dollar move and that could easily happen both on the upside and the downside. February vol is about 19 going into the event and is likely to see 16 or so following. We’re not playing this event but those looking for a cheap hedge or directional bet should look to Jan or Feb options.