American Express has pulled back to a key Support area but still has some sentiment issues it seems (recent news of the Costco partnership ending doesn’t help). Here is a PnF chart on $AXP that shows just how important the current price level is:
I frequently plan for – and execute – trades that are designed to take advantage of a big price move at Earnings (the “catalyst”). Although most of the time I do trades near the event – prior day or day of – there are times where I want to plan for a run-up into Earnings. Here’s why:
1) Options are cheaper weeks before the event (IT has not ramped yet)
2) If you do get an UP move in price – and have a Bullish biased trade on – you get the benefit of price appreciation AND IV inflating
I have elected to take this approach with Nike as it reports on March 26. I will be using March 27 weekly Options:
Part of my preparation process is to look at available consensus data for EPS. I use Estimize as one such data-set:
The EPS graph above is a perspective that I use (I added the Asc Triangle myself) to help determine if there are any patterns. Next I review a Daily chart:
Now on to a few Trade Ideas:
Long the March 27 weekly 92/95/85 Risk Reversal Call Spread (RRCS). This trade should cost a $.25 debit. This trade takes margin (until the Short Puts are closed at least)
Long the March 27 weekly 92/95/97 Lopsided Call Fly. Wait to Short the Puts until you have a more solid floor (and I would likely use a nearer dated expiration too). This trade should cost a $.75 debit for the initial Call Fly
Sometimes a trade looks ok – and then sometimes they suddenly don’t. For my $!@rr##*Ts## position this week I bring you $ACHN:
I have had a March 14/18 CS in the IRA for a while (Long $14 Calls since 1/14, added Short $18 Calls on 1/27 to make the CS). I am using Options so that I can participate in a move but in a way where the Risk is well-defined.
Well, I may have gotten too complacent by letting it fade all the way down to near $10 now.
Time to reassess now.
Now on the bright side, I do have $2.85 in booked gains on a Stock trade. There is an Options Net of $1.75 too. My luck the CS will expire and then they’ll get bought out in April lol.