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How to Play Joy Global Ahead of Earnings

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JOY will report earnings before the open on December 12. Here's what investors and traders can expect to see.

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Earnings reports translate into stock movement. The questions are, which way, and for how many points? Tomorrow, Joy Global (NYSE:JOY) will report earnings before the open, so what can investors and traders expect to see? JOY opened trading today at $58.02, which is below 150- and 200-day moving averages, and the chart appears to be more on the bearish side. The stock is well off the November 1 high of $66.03, currently trading around the $58 dollar level and seems to have hit a top at the $58.25 level. Along with this, expectations about the earnings per share have lowered over the past month and underperformed on expectations last quarter. JOY has seen a negative change in stock price after earnings for the last three out of four quarters, with an average magnitude change of 5.9% post earnings. The ATM straddle is suggesting a 6.1% move, not too far off the expected move from earnings. With this in mind, our options play is as follows:

Buy the Dec 57.50-55 bear put spread for $0.80

Risk: $80 / 1 lot

Reward: $170 / 1 lot

Breakeven: $55.80

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No positions in stocks mentioned.
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