Citrix Systems (CTXS)

On Sept 24, 2009, Goldman Sachs added Citrix Systems to its Conviction Buy list with $45 price target.  At the time the stock traded at $37.  On Oct 21, Citrix beat earnings expectations by 4% and alluded to 8-9% revenue growth in 2010.  Since then at least 5 analysts have come out and upgraded the stock with price target of $45 or higher.  


The reason why Citrix is catching my attention today is that earnings come out this Wednesday, Jan 27 and while the stock is slightly down, some large blocks of call buyers are showing up at Feb $45 strike.  The implied volatility in Feb is elevated to 45 and a total of 14,000 contracts have exchanged hands vs. 5,800 open interest, clearly implying opening positions.


This might be a straight speculative earnings play as $45 has been a strong resistance since Oct, 2009.  The implied volatility in March is around 38.  Taking advantage of the volatility skew, I like the following calendar spread going into earnings on Wednesday:


- Buy to open March $45 strike calls
- Sell to open Feb $45 strike calls


The spread can be done for a net debit of $0.35.  Given the volatility skew, the spread provides nearly 4-to-1 profit if CTXS closes at $45 on Feb expiration.  Potential P&L and daily charts are attached. 


Good luck!