Since last week's column was met with such enthusiasm, I though I'd return to the buffet table of earnings releases -- there are more than 200 companies to choose from next week -- and gather a sample plate of stocks with suggested option strategies.

Once again, I'm using scheduled release dates as simply a starting point for trolling through names that may be setting up for a move or that offer a valuation play in the days surrounding the earnings report. But these aren't plays on the action right before or right after the results, but rather an attempt to identify attractive risk/reward scenarios based on relative options prices, such as current implied volatility vs. historical levels, some technical analysis and broad macroeconomic trends, where appropriate.

Of course, earnings reports, especially this quarter, can produce some big initial opening gaps, spikes and reversals that seem to be custom-made for using front-month options (those with less than 45 days remaining until expiration) to capitalize on the short-term price.

However, when you take into account the bigger picture of forward guidance, longer-term price trends and current economic conditions, along with the fact that option prices are generally sitting near eight-year and historic lows, it suggests that employing longer-dated options (those with at least three to 12 months remaining until expiration ) offers not only a better value proposition, but also supplies sufficient time for the investment thesis to play out. In addition, longer-dated options allow for making adjustments during the position's life that can lock in profits or mitigate damages.

Here are three companies slated to report during the next week that caught my eye:

Boston Scientific ( BSX) will release earnings on July 19, and is expected to earn 48 cents a share, a 220% gain from last year. In the following quarter, the company is expected to post 6% sequential gains and another 224% year-over-year increase. The main driver for profit and revenue growth has been the company's Taxus drug-eluting stent, which now controls about 70% of the artery-opening heart-valve market, compared with previous market leader Johnson & Johnson ( JNJ), which has just 20% of the market. You could argue that given the stock's 250% gain to $42 over last two years, the stock is fully priced.

Priced to Perfection?
BSX has shot higher in the last two years

But the 10% decline toward support at the $40 level appears to be a justified consolidation after the large run-up in mid-May -- when shares gained about 17% in a two-day period -- brought the stock's price/earnings ratio to a reasonable 18 times forward earnings.

The stock is positioned to move higher; current sentiment readings, which had been wildly bullish through most of 2003, have been understandably tempered of late, as indicated by the put/call ratio rising from 0.49 to 0.91 over the last three months. This increase in put-buying can be construed as a contrary indicator and a potentially bullish signal of an intermediate-term bottom.

Boston Scientific options have typically sported relatively high implied volatilities due to the fact that efficacy data and approval rulings from the FDA keep investors on pins and needles. But the current implied volatility is just 31%, well below the 30-day historical or actual volatility and just slightly above the 52-week low of 27%.

Given the relative value of its current option prices, its long-term earnings and revenue growth prospects, as well as the technical support at $40, buying the January 40 calls for $4.40 a contract looks attractive. This allows plenty of time for the shares to make a run back to new highs, and also provides the flexibility of scaling into the sale of shorter-dated calls (creating a calendar spread) at favorable prices to reduce the position's overall cost.

Robert Half ( RHI) one of the leading staffing, temp and employment-resource firms, is expected to report earnings on July 20, with estimates calling for earnings of 11 cents a share -- a nice increase from the profitless quarter recorded a year earlier.

One problem is that only one of the 14 analysts covering the firm has made a rating adjustment in the last 90 days, and that has been upward. This seems to fly in the face of the concept that job growth seems to be, if not stagnating, at least moderating, meaning you should be braced for the company to be forced into lowering guidance for the remainder the year. The stock-price action already reflects an anticipated deceleration in earnings growth, as the shares have fallen 12% in just the last three weeks. This has created a massive topping formation and a break of the four-month uptrend.

While the stock may find some near-term support around $26, the new intermediate-term trend leans to lower prices. The implied volatility on the options are a fairly rich 40%; this compares with a 60-day historical volatility of just 25%, suggesting that a sale of calls or even selling a call spread for a net credit would offer a good risk/reward position. The advantage of selling calls over buying puts, especially given the relatively rich premiums, is that the seller of calls will benefit from time decay even if the underlying shares merely tread water in the near term.

You may want to look at selling the August 25 calls, which are currently trading at $2.60 a contract. If you want some upside protection, the September series, specifically the purchase of the $30 strike at just 50 cents a contract, can help you sleep at night if you fear carrying naked or uncovered short-option positions.

Coors ( RKY), which is slated to report on July 22, has seen its shares pressing near a new 52-week high, and they appear poised to challenge the all-time high of $78. If the stock rallies toward this level, you might consider buying the currently inexpensive put options (an implied volatility of just 18% vs. the 60-day historical average of 29%) to establish a short position. The company is facing increased competition, distribution and shelf-space problems, as well as tightening restrictions and criticism surrounding its association and dependence on drinking at sporting events.

In what has been a basically lackluster and range-bound market, this earnings season, like a good librarian, is providing a large list for investors to peruse and hopefully choose a few titles that will supply a profitable experience.
Steven Smith writes regularly for In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He invites you to send your feedback to