Will U.S. Bancorp (USB) Follow the Trend in Financials?

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U.S. Bancorp (USB) is a Minnesota based regional bank and financial services provider. At the time of this post (1:15PM CST), USB is currently trading at 41.02, down 1.20% on the day. The stock is currently well within the lower portion of its 52 week trading range of 38.10-46.10 following a sharp reversal and decline off the highs which printed in late December. USB is scheduled to report earnings tomorrow, 1/21/2015 before the opening bell.

Over the last eight quarters of earnings data available, USB has traded predominantly bearishly, moving lower on six out of eight sessions immediately following the EPS release. The average historical move during this same time period was approximately 1.3%. Currently the options market is pricing in an implied move of nearly double the historical average, or around 2.5% based on the current pricing of the at the money straddle. This would represent about a 1.00 change in the price of the underlying stock by this Friday’s weekly options expiration. USB is currently trading below the upward sloping Ichimoku Cloud and all relevant moving averages on a daily chart. Additionally, with USB’s heavy bearish lean following earnings six of the past eight quarters, coupled with the recent weakness in most of the other larger banks and financial stocks, I will be looking to get short USB going into this afternoon’s close.

Potential Trade: Buying the USB Jan 23rd Weekly 41-40 Put Spreads for $0.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Breakeven: $40.75

Andrew Keene

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