As we head into the heart of Earnings season, my focus on this segment of my trading increases – it is where I find some of the best opportunities for new trades. I use Options as a key component to most trades for a variety of reasons: lower capital requirements & the flexibility to participate in the post-Earnings price reaction.
It is an important step for each trade to do a thorough review - and sometimes I like to share that info along the way (from trades that are still in progress). I have 2 new trades that I did yesterday and I thought I would review where things stand now that the Earnings event is over.
- I am Long the October 24 weekly 91/95/82 Risk Reversal Call Spread
- This means I am long the 91/95 Call Spread and short the $82 Puts
- This trades takes margin this week (or until the short naked Puts are closed)
- The trade was done for a .05 debit
The above chart shows the close from yesterday. The current price in pre-market trading is $84 so I will need to monitor the short Put strike. It does not appear that I can get any value out of the Call Spread.
Polaris Industries ($PII):
- I am long stock at 146.84
- I have a November 160/145/135 Collar Put Ratio
- This means I am short the $160 Calls (covered by stock) and long the 145/135 Put Ratio (1×2)
- This trade does take margin due to the Put Ratio (until at least 1x of the short $135 Puts are closed)
- This trade was done for a .55 credit
The above chart shows the close from yesterday. The current price in pre-market trading is $149 but there has been very little volume (normal for this stock). With this trade design I can participate on any move up to $160 and I am protected down to $135 (+/- the credit received).
Here is a list of my trading activity today:
$UVXY I am short this ETF on the $40 break (Sell Short Stop trigger, a hedge for the short November Option trade)
$CELG I initiated a new long stock Fab 5 position today (Buy Stop at $90 trigger)
$TSCO The short stock piece in the Submarine Basket was covered today. The November option pieces remain
Long Oct 24 weekly 102/104/95 Risk Reversal CS. This means you are long the 102/104 Call Spread and short the $95 Puts. This trade can be done for a small credit, takes margin, and you must be comfortable owning at $95 (or you can adjust to next week – or further out expiration if desired/necessary)
Long the October 24 weekly 650/675/700 Call Fly with Short $575 Puts. This trade can be done for a $1.75 credit (and takes margin)
I ended last week with 5 positions:
I came into last week with 4 positions in the 50/50 Basket and only 2 survived to the weekend: $APT (has a Stop at $7) and $LAKE (both Ebola related).
The Digital Ally ($DGLY) position hit a Stop and the Tekmira Pharma ($TKMR) position was closed (October Options exit).
Here are a few charts showing the reaction to Earnings today. First, a look at Lennox International ($LII):
The big release this morning in pre-market was from $IBM and this is how investors/traders reacted:
Finally, a look at how Bullish the market got on Hasbro:
Here is how the Fab 5 ended last week:
part of the Simple Approach series
I have a position in the IRA for Marriott ($MAR) but wanted to point out the RSI Buy level that was triggered last week on the Daily chart:
I was not able to get this out over the weekend but here is how the current personal accounts ended last week:
Here is how the Submarine Basket looks after the October monthly Option expiration: