An Earnings trade idea in ManpowerGroup

I posted a trade idea on @Stocktwits earlier this week but wanted to follow up with a few data points. First, a look at the idea again:

  • Long the August 85/90 1×2 Call Ratio
  • Short the August 75 Puts
  • This trade closed at a $.20 debit Friday
  • This trade would take margin until the short Puts and one set of Calls are closed

Here is the Option chain info:

MAN_Aug_Options

As you can see above, the August $90 Calls have the largest Open Interest by far.

Here is the Daily chart:

MAN_b

A few scenarios to consider:

1) price moves above the $85 level but avoids $90. StC the August $85 Calls when you see price stall for your time-frame. This would leave the short 90 Calls (2x) and the 75 Puts (a Short Strangle) until closed

2) price goes nowhere. No harm, no foul. The small debit for this trade is your cost to participate

3) price goes down to the $75 level (near the April lows). If you are comfortable owning there (you did sell the Puts at that strike) then let the stock get put to you

 

 

The Volume Bar buy signal

part of the Simple Approach series of blog posts

For traders that like to trade with simple triggers you may find this of interest. I use RSI and Volume Bars as Buy/Sell triggers and so I like to offer examples to show what I mean.

For an example using Volume Bars as a Buy signal I bring you $CAB:

CAB_volume_bars

As you can see above, I highlight several Buy points (blue vertical line). Here are the details:

1) Buy the next green Volume Bar – after at least 3 Red bars in a row

2) There have been 6 triggers so far with #7 in the works now

3) Use your own Stop and/or Risk parameters for exiting each trade that you would take

4) Trigger #4 is likely a loser

 

A trade idea in Acuity Brands

Acuity Brands reported Earnings on 07/01 and missed estimates:

Estimize Earnings page for $AYI

The reaction was negative as traders took profits or shorted the report. Here are a few looks at the Daily:

AYI AYI_B

As you can see above, price is hanging on to the 200 SMA right now (one Support level).

So what now? If you don’t currently have a trade, here is one idea to consider (if you think it will start a steady rebound into August):

  • Short the July 120/115 Strangle (takes margin)
  • Long the August 120/125 Call Spread
  • This trade can be done for a small credit
  • The margin use will go poof if price is in between the 2 July strikes at expiration

If the $120 level is too close for you then consider this:

  • Short the July 125/115 Strangle (takes margin but will be less than idea #1)
  • Long the August 125 Calls
  • This trade can be done for a small credit
  • The margin use will go poof if price is in between the 2 July strikes at expiration

Position Updates

Noted activity in the my personal accounts

Although this was a holiday shortened week, I was fairly active in the Swing account. Here are the newly added positions this week that survived to the weekend:

  • $ILMN   L July 175/185/170 Risk Reversal Call Spread
  • $VIPS   L August 200/220 Call Spread (LT account)

Exits:

Submarine Basket:

Earnings:

Here is the Summary:

Positions_07042014

 

Position Updates

a look at my Trading activity for my personal accounts

Here are the newly added positions this week that survived to the weekend:

  • $CTRP I am long stock at $56 with short July 60 Calls
  • $BWLD I own a July 160/165/155 Risk Reversal Call Spread
  • $SLB I own a July 03 weekly 110/116/110 Risk Reversal Call Spread
  • $ULTA I own a July 90/87.5 1×2 Put Ratio
  • $VRTX I am short at $102 with a July 90/90/100 Bear Collar Call Spread
  • $BBBY I own a July 03 weekly 56/57 Call Spread
  • $MPC I am long stock at $78.90 and short the July 03 weekly 80 Calls
  • $BKS I am short the July $23 Calls (2x) with a long stock hedge at $22 (and a Stop at 22.50)

Exits this week:

Earnings:

Submarine Basket:

Here is the Summary:

Positions_06272014

The Trade Process starring Accenture

In order to have a solid Trading Process a trader must be sure to evaluate each trade to see how it holds up to a variety of scenarios. For those that participate in Earnings trades this is especially important given that the reaction can often surprise.

I had decided to do a trade on Accenture ($ACN) for Earnings on 06/25 AMC:

ACN

Here is a breakdown of the trade:

  • I am long the June 27 weekly 83 Calls
  • I am short the June 27 weekly 85 & 87 Calls
  • This was done as a 1×2 Ratio
  • I am also short the June 27 weekly 78 Puts
  • This trade takes margin until Friday (or until the uncovered short pieces are closed)
  • This trade was done for a $.12 debit

The initial reaction this morning in pre-market action was positive but I still need a plan for exiting the trade with profit. I was surprised by a sudden fade in the stock price so I did the following as a next step:

ACN_B
This step – shorting stock to lock in some gains – has ended up being a much larger part of the profit in the trade as price has fallen to near the $80 level:

ACN_B

I have lowered the Stop on the short stock piece to $82 now (locks in $2.35).

Bullish Engulfing

If you are new to trading you may be scared by this term but fear not. The Bullish Engulfing candle simply means that the current candle range exceeds the prior trading day candle – so it “engulfs” the prior price action.

To illustrate this I bring you the Daily chart of Schlumberger Ltd ($SLB):

SLB_B

This powerful up move today is also confirmed by very solid volume. Congrats to those that are long.

Protecting a short stock position using Options

One of the Basket of stocks that I trade is the 50/50 basket. The goal of trades for this is simple:

go short when a stock is 50% above the 50 SMA

One of the current positions that I have in the basket is a short on $CNAT at 9.45 with a July 7.5 Bear Collar. To illustrate how this is protecting the short stock, let’s take a look at a Daily chart:

CNAT_B

The purple line on the chart represents where the Call & Put strikes are. Since this is a July Bear Collar this means I am:

  • Short the July 7.5 Puts
  • Long the July 7.5 Calls

With price at $8.57 at the close Friday, the Calls are ITM (in the money), the Puts are OTM (out of the money) and the short stock piece has a gain of $.88