Earlier this month, streaming name Roku Inc (NASDAQ:ROKU) locked in eight-consecutive losses before an upbeat earnings report saved the equity, helping it jump to $337.24 on May 7, though the security has since pulled back once again. However, investors shouldn't be too concerned yet, as this dip has Roku stock trading near a bullish trendline, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

Specifically, ROKU has come within one standard deviation of its 200-day moving average following a lengthy stretch above the trendline, defined for this study as having traded north of the moving average 60% of the time in the past two months and in eight of the last 10 trading days. The equity has seen two similar pullbacks within the past three years, and one of those instances resulted in an average 21-day gain of 18.2%.

From its current perch at $308.43, a move higher of similar magnitude would put ROKU at $364.56. In simpler terms, this would give the equity the boost it needs to reclaim its 2021 breakeven and add to its 133.6% year-over-year lead. 

Now that earnings are in the rearview, a volatility crush means the stock's near-term options are attractively priced at the moment. Roku stock's Schaeffer's Volatility Index (SVI) stands at 56%, in the low 7th percentile of its annual range, indicating that now is a good time to jump aboard the streaming name's next move with options. What's more, Roku stock has tended to exceed these volatility expectations during the past 12 months. This is based on its Schaeffer's Volatility Scorecard (SVS) of 96 (out of 100).

Gaming name Roblox Corp (NYSE:RBLX) just posted its first earnings report since going public back in mid-March, and the results were mixed. The firm reported losses of 46 cents per share for its first quarter, which was wider than Wall Street's forecasts. On the other hand, its revenue rose 140% from a year ago and topped expectations, coming in at $387 million. The company said its app, targeted towards children, had a successful debut a few month ago because of school shut downs and stay-at-home orders. The security is up 0.5% at $64.31 in premarket trading as a result. 

This is slightly below where the stock closed on its first day of trading, settling at $69.50 on March 10. The stock's movement since then has been quite mild, with a brief surge to $83.41 on April 13 before once again dropping lower. RBLX is at risk to close at its lowest level yet, however, should things turn sour today. 

All four analysts in coverage are optimistic on the Wall Street freshman, though, with "strong buy" ratings across the board. Adding to this, the 12-month consensus price target of $78.17 is a 23% premium to last night's close. 

Option traders appear to be in a similarly bullish boat. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), RBLX sports a 50-day call/put ratio of 4.69. This means during the past 10 weeks the number of calls picked up has more than quadrupled the number of puts. 

Things start to pick up today as investors digest the latest National Federation of Independent Business' (NFIB) small-business index reading, as well as job openings data.

The following companies are slated to release quarterly earnings reports today, May 11:

Looking ahead to tomorrow, attention turns toward the consumer price index (CPI) and core CPI readings. In addition, the latest Federal budget balance is due out on Wednesday. All economic dates listed here are tentative and subject to change.

When combined with fundamental and technical factors (a 3-tiered methodology we call Expectational Analysis®), sentiment becomes a powerful tool for analyzing stocks, sectors, or the overall market. This is especially important as earnings season ramps up. 

Last week was a whirlwind of corporate reports, which we tried to cover here, here, and basically everywhere.

But this week still brings plenty of earnings action, so we're going to harken back to our Benzinga feature that aired last month. Below is an excerpt of the article, which can also be found here.

It’s earnings season, a time of trepidation and anxiety for publicly held companies. But according to Schaeffer’s Investment Research, a privately held provider of stock and options trading recommendations, earnings season also provides a look under the hood of how companies have been managed over the past few months and how they may fare going forward.

According to Schaeffer’s, it’s also a time of opportunity for traders who can play options before the earnings announcements, or after the reports have been released. But they warn that playing options before the announcement is the riskier move, though potentially yielding large profits if the directional move is correctly predicted. However, jumping in with options after the release could set the investor on track with long-term directional movement.

Schaeffer’s Investment Research offers the following outlook and advice on options trading during earnings season.

Using Options to Profit During Earnings Season

One way to speculate on volatility using options is by employing a long strangle options strategy. Much like a straddle, a long strangle involves a bullish option trade and a bearish option trade, played simultaneously. Both the call and put are bought to open, and both trades share an expiration date. Unlike a straddle, however, a strangle employs a call and a put at different strike prices, usually slightly out of the money, that sits on either side of the underlying stock's current price.

Even Without a Crystal Ball, You Can Still Make Money

Event risks such as takeovers and earnings reports can cause stock prices to make huge, fast moves in either direction. In the traditional, old-line investment world, it might make sense to define the associated “risk” as a substantial decline in the share price. But in the modern trading world, with its hedge funds and short-term traders, who may as easily be holding short positions as long positions, and with the added flexibility investors have to profit on bearish views by buying put options, event risk is now “an equal opportunity” phenomenon. A sharp reaction to the upside could be at least as devastating to a short seller or a put holder as a sharp decline would be to a stock or call option owner.

One fascinating aspect of “date certain” events is that even though they can have an explosive impact on a stock or on the market, you as a trader can plan your strategy in advance and execute it just before the event is scheduled to occur. This means that you can position yourself to achieve big profits in a very short time period, often in less than a full trading day.

Pre-Event Trading: Putting Time on Your Side

The easiest way for option buyers to mitigate volatility going into a date certain event is to only trade events that occur during expiration week and simply buy front-month options the day before the known event date occurs. This may run counter-intuitive to other option buying strategies, in which time decay is a concern. However, for event trading, you are only going to be in the trade for a very short period of time (as little as one day). For the event trader, expiration week is the optimal time to make your move: Your leverage is at its greatest, you have the fewest dollars at risk, and the “penalty” of higher volatility premium is minimal.

Post-Event Trading: Capitalizing on Certainty

In trading “post-events,” because the element of uncertainty is removed, you can make decisions based on more factual information, while the options are much cheaper. If the news is sufficient to change the market's perception of the shares, this could create a sustainable move in the direction of the immediate price reaction, and buying options at much cheaper prices when the volatility premiums are minimal might make sense.

While Schaeffer’s Investment Research admits they can neither predict nor trade in front of “out of the blue” events like financial catastrophes and terrorist attacks, “date certain” events such as earnings announcements offer a unique opportunity for the option trader to capture potentially explosive stock movements in very short time frames. They add that by properly measuring investor expectations ahead of the event, you can help tilt the odds in your favor of getting the post-event direction right.

Learn more about Schaeffer’s Investment Research at www.schaeffersresearch.com.