FuelCell Energy (Nasdaq: FCEL), a global fuel cell company also specializing in the development and production of electrochemical energy production facilities, is scheduled to report earnings after the bell Tuesday.
Recent Action
FCEL shares are up a whopping 67% year to date, trading in a 52-week range of $1.10-$4.74. The sector had enjoyed a strong start to 2014, prior to a March report from short-seller Citron Research trashing FCEL rival Plug Power Inc (PLUG). FCEL shares are since off nearly 40% from their March $3.93 high.
Bearish Earnings Pattern
FuelCell has fallen short of earnings the past two quarters, with strong headwinds coming from domestic oil and natural gas production and increased competition. Shares have fallen on 3 of the past 4 earnings reports, and of the past 8. The June serial at-the-money straddle is implying a move of $0.35, versus a historical mean of 11% on earnings. I would only look to get short going into earnings, in this case via the June 2.5 Puts for $0.30.
Option Trade
Trade: Buy the June 2.5 Puts for $0.30
Risk: $30 Per 1 Lot
Reward: $220 per 1 lot (theoretically)
Break-even at expiration: $2.20
