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AMZN, BIDU and P enter the earnings confessional soon. Get out in front with these options ideas

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Pandora (NYSE:P)

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Finally, we arrive at up-and-coming Internet radio broadcaster Pandora (NYSE:P). The company is expected to post a loss of 14 cents per share after the close of trading on Thursday, with guidance ranging from a loss of 14 cents to a loss of 16 cents per share. Revenue is expected to arrive at $175 million.

Some on Wall Street might be expecting Pandora earnings to top the consensus estimate, especially considering the company’s strong subscriber growth in 2014. The company grew market share to 9.11% in the year ending in March, year-over-year listener hour growth arriving at 14%. As a result, P stock has attracted 20 “buys,” versus nine “holds” and two “sells.”

This enthusiasm ends with the brokerage community, however. For one, short interest totals 14.5 million shares, or 8.28% of P stock’s total float, or shares available for public trading. And if these shorts are nervous about a rally, it isn’t showing in P’s options data. In fact, the weekly April 26 put/call ratio has ballooned to a hefty reading of 1.21, with puts easily outnumber calls in this soon-to-expire series.

Technically, the stock deserves some criticism given the recent correction, but P stock has rebounded considerably off its recent lows. Shares are now back above their 200-day moving average and are looking to reclaim the $30 level as support. Resistance could emerge near $33, as P’s 50-day trendline resides here, but post-earnings momentum could eclipse this hurdle.

P stock’s weekly April 26 option implieds are pricing in a potentially sizeable post-earnings move of about 11%. This places the upper bound near $32.17, while the lower bound lies at $25.83.

Bull Call Spreads on P Stock

Those looking for an earnings induced rally might want to consider a May $29/$33 bull call spread. At the close of trading on Tuesday, this spread was offered at $1.30, or $135 per pair of contracts. Breakeven lies at $30.30, while a maximum profit of $2.70 is possible if P stock closes at or above $33 when May options expire.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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