How to Trade E*Trade’s Earnings

A sneaky play without taking the direct hit of an earnings announcement might be a bullish trade on E*Trade Financial (ETFC, $36.93, up $0.21). Shares have been in a strong, tight range for two weeks but have been setting higher highs and fresh 52-week peaks since mid-November.

Analysts are expecting a profit of $0.42 a share on revenue just shy of $502 million. The high estimate is pegged at $0.45 a share with the low at $0.39. The high revenue estimate is north of $517 million while the lowball is at $459 million. The company has topped estimates by 12 cents and 10 cents, twice, over the past three quarters.

The ETFC February 38 calls (ETFC170217C00038000, $0.95, up $0.15) look attractive at current levels and would give the trade a month to play out. If ETFC shares can clear $40 by mid-February, these options would easily double from current levels. Of course, an earnings miss, or lowered guidance, could cause a pullback in the stock.