Smooth Trip for Options on Vail Resorts

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Options trading investors need to look to next week for an earnings trade since this week’s holiday-shortened line-up has just two S&P 500 companies, neither of which is very compelling for a trade. Next week’s schedule is light as well but has a few notables, including Vail Resorts (NYSE: MTN), which operates a number of high-end ski resorts, luxury hotels, and real estate properties.

MTN reports before the bell on June 9, with analysts expecting a modest 8% increase in EPS from a year ago. Though the company has a spotty record of beating these estimates, performance after recent reports has been impressive.  During the last four quarters, the stock has gained an average of 3.8% in one week and 4.7% in two weeks following earnings.

Since hitting a multi-year high near the 54 level in December, the stock has been sliding lower. But the shares found support at the 200-day moving average and have rebounded more than 8% in the past week. The next obstacle is the 100-day moving average, which snuffed out rallies in April and earlier this month. Overcoming the 100-day should clear the way for a return to the December high, a move of about 12%.

Sentiment is unremarkable except for short interest. With a short-interest ratio of around 16, a short squeeze could be a major factor in providing the stock a boost to reach a new annual high.

There’s still some time to wait before MTN reports. With the 100-day looming overhead, waiting to see if that hurdle is cleared before earnings isn’t a bad strategy. Spreads on MTN options are a little wide, so we’re recommending the MTN July 47.50 Call for three bucks or less, which should provide the most bang for your buck.

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Article printed from InvestorPlace Media, https://investorplace.com/2011/05/smooth-trip-for-options-on-vail-resorts-mtn/.

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