How To Play DSW’s Earnings (DSW)

Shares of DSW Inc.

are higher on the session by 0.16%, currently trading at $24.36. The company is scheduled to report earnings tomorrow before the bell. For a full earnings preview, including technical breakdown, earnings estimates, whisper number, and volatility skew, please

. The technicals are negative for the stock, no doubt; given the recent breeched of the $25.00 support level to the topside, traders have switched to a “sell rips” attitude for the stock from “buy dips.” Given the recent snap back rally above the $25.00 level, then the subsequent sell off, this has been somewhat confirmed. Also, note that earnings estimates have risen quite notably over the past quarter, which means that the company really needs to deliver a solid number to hang at these levels. All in all, the pieces of the puzzle are forming a bearish picture. Given the heightened volatility in the front month, though, going out and buying a naked put, or even a front month put spread, places you in a difficult moneymaking position. With October vol trading at only 50.75% (versus 59.67% in the front month), there is room to take advantage of near term vol to voice a bearish thesis. Traders should look to buy the October $25.00 put (50.79% vol) for $2.30 and sell the September $22.50 put (65.43% vol) for $0.55. Net debit on the trade is $1.75. Traders can make quite a bit on just the volatility compression alone, therefore you only need the stock to remain at these levels. Of course, if the stock moves lower you will be a bigger winner, though. For more great research like this, as well as how to play it through options…please visit

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