Fiserv stock fell 21% on Wednesday after the company reported disappointing second-quarter results. The stock price dropped from about $166 to a low of $128 during morning trading. While the markets improved with a trade deal with Japan, European tariffs remain a concern if the U.S. imposes unilateral tariffs. Other companies also saw stock declines, with Texas Instruments dropping 12% and Enphase Energy 8%. Investors are now waiting for further Q2 results from Tesla and Alphabet. In its second quarter, Fiserv’s organic revenue grew 8% year-over-year to $5.18 billion, but this was below the expected $5.2 billion. As a result, management lowered its full-year forecasts. They did increase EPS guidance by 5 cents, but the market largely ignored this. Fiserv’s adjusted EPS came in at $2.47, with revenue of $5.52 billion, exceeding Wall Street’s expectations. However, despite decent Q2 results, Fiserv’s shares returned to levels last seen in February 2024. Technical indicators like the Relative Strength Index (RSI) suggest there could be buying opportunities ahead. The candlestick pattern resembles a hammer, which suggests possible interest from buyers as shares recover from earlier lows. If trading opens above the previous day’s high, it could signal the start of an upward trend. The steep decline in stock price has led to a sharp increase in implied volatility, indicating expected price swings. The 30-day implied volatility has risen to over 45%, significantly higher than its 52-week average of around 25%. This atmosphere makes selling options premium an appealing strategy for those thinking the stock will stabilize. Given the current technical indicators and oversold RSI, we plan to sell out-of-the-money puts in the coming weeks. This strategy allows us to benefit from the volatility spike while setting a comfortable buying price below the recent low. Historical patterns show that after similar post-earnings drops of over 15%, the stock often finds a base and trades sideways or slightly higher in the following month. For traders hoping for a quicker rebound to February levels, high volatility makes buying calls quite expensive. A smarter approach would be a bull call spread; this reduces initial costs by selling a higher-strike call alongside the one being bought. While this limits maximum profits, it offers a better risk-reward profile if the stock begins the suggested uptrend. We must also consider the fundamental reasons behind the decline, as the reduced full-year forecast may limit any major rally. The potential for European tariffs adds another level of macro risk that could affect investor sentiment. Therefore, a defined-risk strategy is crucial since failing to open above the previous high could negate the bullish technical signals.

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