Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
HIMX- Its not my type of stock that I would normally look at
Its out of my trading area focus.
The question is ..How long do you want to be in this trade for ?
If its short term, the probability of a strong upward price movement is not very positive
But if you believe that in the medium to long term the share price of FUEL will be significantly higher , plus the possibility of a takeover , then the only options worth considering are the LEAPS..In my honest opinion
Okay,thx!!
But i belive we could/should See some Kind a technical Up-reaction
Any thought on HIMX?
Europtiger : One more factor to take into account
There have been some significant insider sales in Feb.
http://finance.yahoo.com/q/it?s=FUEL+Insider+Transactions
Thx for your informativ answere... I will follow FUEL close in the coming days and watch for a call entrey
Europtiger : FUEL - Thanks for this post
Interesting company with a good cash position, growing customer base, and growing revenue
BUT - On Thursday after market close , when the company announced its earning results and its " forecasts " the share price collapsed by more than 25% !
And on Friday, when the market opened the share price slightly rallied but still ended up down 21.5%
This board is for trading stocks prior to their earning results, and this would be a good example.
Conclusion
Your question is more a fundamental one : has the market over reacted and is it worth buying CALL options based upon financial measures.
Its valued now at about 4 times sales. Not overly priced. Over $100 million cash in the bank. Growing customer base, but possibly at the expense of bigger discounts and drop in revenue, which could mean further missing of targets in the next quarters.
This could be a possible takeover target
Its certainly worth looking at the CALL option strike price for LEAPS
I am thinking of an call on FUEL
Any thought?
A PRIMER IN TRADING OPTIONS DURING EARNINGS
Let me start this post by declaring that majority of this content has been taken from a Daniel Darrow article.
Its a great article , and it gives a good informative start to my thoughts
Lets Start off with Volatility
Either you're banking on it being high, or banking on it not appearing. Either way, earnings season is characterized by increased volatility, so naturally it is haven for options traders. However, earnings season brings on equal measures of opportunity and risk, so if you are going to be involved, at no time is it more crucial to be educated.
Hence this board !!
Implied Volatility
Within the price of every option includes "implied volatility" - the consensus percentage that traders believe the stock is going to move. After reporting quarterly earnings, stocks often have large price fluctuations, so implied volatility during earnings season is generally higher. When using a straight call or put-buying approach during earnings season, they key is determining which stocks I think will move more than Wall St expects them to.
After Earning Price Moves
To many, the nature of post-earnings price movement can seem somewhat random. Traders and investors are sometimes left scratching their heads when a stock can beats earnings "estimates" but subsequently trades lower.
Although the market can be very unpredictable at times, I do believe there are ways to potentially identify which stocks could exceed their implied volatility. My methods are FAR from an exact science, but the key for me is consistent sizing and betting on the fact that I can be right more often than not. In fact, I don't even need to be right more often than not, I just need to identify a few potential big winners that can cover losses in the stocks that don't pan out.;
1. Market Cycle
One of the most important things to consider when trading options on earnings is the type of market cycle that we are currently in. In 2013, for example, we have seen a raging bull market. The downside movement during earnings seasons has generally been muted, while we have seen dozens of examples of massive gaps up.
In a bull market, people tend to be forgiving to an earnings miss and more rewarding for a beat. During market turmoil, the opposite is true. I believe IMHO , that any options play into earnings should generally follow the trend of the broader market, as well as the sector and stock. That isn't to say that I won't take any puts into earnings reports during a bull market, but I tend to take a top-down type of approach.
2. Stock History in Previous Earnings Moves
A second factor to consider when determining a potential play is the stock's history of earnings moves. While past performance is not always an indication of future results (and large moves are often priced into the options for volatile stocks), I believe the size of the moves in reaction to the most recent 2-3 earnings reports are a useful gauge as to what the next move could be.
I give the most weight to the move from the most recent earnings season. For instance, if a stock has had initial moves of 15% three quarters ago, 10% two quarters ago and 5% the past quarter, then I would say that earnings volatility has been decreasing and I should not expect a large move. In an alternate scenario, if there were moves of 5%, 5%, and 10%, then I could be expecting a large move.
3. Stock Price leading into the Earnings
A third factor to consider is how the stock has moved leading into the report. Aggressive buying or selling in the previous weeks/days prior to a report can eat into the potential post-earnings move. Good or bad news could already be priced into a stock and could potentially eliminate a sharp move. When I believe opinion has reached near-consensus levels, sometimes I take the other side.
4. Short Interest
A fourth factor to consider is the level of short interest, which has been particularly relevant lately. Taken alone, short interest should not be used to determine, which direction to bet on - in fact I think it's a trap many traders fall into. Short interest simply be considered a factor that could exaggerate a move in either direction, particularly the upside.
5. Conclusion
In analyzing a potential options trade, I analyze all of these factors together to identify the stocks I want to play. For instance, a stock trading about 5% from all-time highs with high short interest, that has a history of 7-10% moves following an earnings report could be a candidate for a large move to the upside. In a different scenario, a stock that is approaching a large gap could a be candidate for a gap-fill play even if the stock only has a history of 3-5% moves and the gap might be larger than 5%. In yet a different scenario, a stock that has been in a tight consolidation might be set up for a sharp move in either direction and might be a candidate for a straddle or strangle.
This post was meant to be an overview of a few of the factors I consider, and I will do another post , on the type of options I generally buy.
I feel that trading options around earnings is more of an art than a science, but if you can develop a discerning eye, you could potentially create great trade ideas with well-defined and favorable risk-reward parameters.
Thanks. And welcome...
On Board,lets See what we got here
All the best to your new Board!
Thanks cast iron, il check on it... have a nice day
Update on TSLA
Well as per my post earlier , I got stopped out ( with a nice profit ) at 23.45
Only to see that by late afternoon TSLA had fallen back substantially and I would have easily hit my target of 33.00
That's nearly a $1,000 per contract !
Nobody said the markets are fair ! Actually the markets don't know or care who you are . Trading successfully IMHO cannot be based on any type of personal emotions. This board and type of trading I believe can only work based upon probabilities with a defined method
Comments are Welcome !
Silver : Welcome to this board
There are lots of books on Options and if you search on Amazon you will find a very big selection
The one book that is relevant to this board and is an excellent primer on Options and trading them in the Earning News is by the authors John Chen and Ping Zhou. The Book is called " Trading On Corporate Earning News "
Hope this helps you
Good Luck
I came here cause I'm curious of option trading.... Puts and calls what is that? Is their a forum or a guide to better understand me on this kind of trading... Can you guys provide me with a website or a book to start with... Thanks a lot..
You're welcome, it's in real time and lots of ideas floating around.
Hafiz : Ok I just checked this out , and I have signed up
thanks for informing me
No..never heard of it
New Trade Today
MNST
I bought the MAY 09 62 CALL at a STRIKE PRICE OF 4.90
UPDATE ON THE REGN TRADE
Again as per my post yesterday , I bought the MAY 09 PUT 295 Option at a strike price of 13.80
The trade started in my favour with a nice drop pre market on the results
However the pharm sector is hot so I set a lower target to close this trade at 17.90 and to be stopped out at 14.00
Result : I got stopped out at 13.26 after a reversal with a loss
of $54.00
I should make the point here, that I am not expecting every trade a winner.. Just the opposite I am presuming some trades at total loss
The deep ITM options provides some buffer
The key in my trading style is keeping the losses at a fixed amount based upon the pre markets and fixing the potential gains at a multiple
I will be posting more on this later with the probability stats and the maths behind this
UPDATE ON THE TSLA TRADE
As I posted yesterday I bought a May 09 PUT 215 with a strike price at 18.80
After hours the stock dropped and this morning pre open is was down to 181
This was an interesting challenge here as to when to close the position. I should make it clear that I am certainly no expert and do not possess a crystal ball which meant that closing this position required a defined target
Based upon the drop pre open , I set a target to close 33.00 and a stop at 23.50
Result - Never hit my target and I got stopped out at 23.45 with a net profit of $463.00
I will leave you to work out the return on this two day trade!
Earning Announcements worth Considering
Below is a select list that I have picked with the earnings announcement tonight and tomorrow morning
Please feel free to post any views on any of these stocks
MELI
MNST
RL
SSTK
SYMC
UBNT
Excellent, that sounds great!!
Thanks for having me!
Hafiz : Welcome. The mathematics behind the option are not that complex and only play a part in the understanding. The key really in my opinion is placing the trade in the right position and understanding the risks.
Options decay very rapidly and most people trading options do not account for this factor
However this board is not based upon trading options over a medium to long term. ( though there are special situations where this could be attractive )
This board is for very short term trading, discussion and ideas, where the time decay factor is not a key issue..
I will be updating this board on a regular basis after any trade that I execute with the result the following day. So you will be able to follow and see what I am doing
Thurman : you have raised a good point. And that's the standard thinking, though I have to disagree.
There is a book , which you can buy on Amazon called " Trading on Corporate Earnings" by John Shon
This great book, based upon 20 years of back testing basically demonstrates that the biggest gains on any stock happened during the 4 periods of its earnings reporting
I should clarify that I am talking about "Short Term Gains"
The purpose behind this board is to see the opportunity of how to maximise the gains during this period. IMHO based upon my trading results, the Implied Volatility issue has less impact than being on the right side of the trade !
Options lose tons of value right after earnings with the drop in Implied Volatility. You still do this anyways ?
Thanks for inviting me over!
The 3rd qualification may eliminate me, for I don't know the exact mathematics behind options... I simply go by price action and like you get ITM or one or two strikes out.
What I have learned is that when there's money on the table, to take it, for options decay quite rapidly although the same stock price is revisited the same day.
My First Post of this New Board !
Two Big Earnings Announcement
TSLA - Here is my view I have taken a single PUT option deep in the money ( ITM )
I want to say that I always trade options deep in the money
I will discuss this another time.
REGN - Another big momentum player. This announcement is coming out tomorrow morning 05/08/14
PRGO today was deeply down after its morning announcement
The charts are showing a def down swing.
The last two Q the stock has substantially gapped but its now looking tired
So I have taken a deep ITM PUT position
Lets see what happens by tomorrow
Followers
|
3
|
Posters
|
|
Posts (Today)
|
0
|
Posts (Total)
|
29
|
Created
|
05/07/14
|
Type
|
Free
|
Moderators |
Volume | |
Day Range: | |
Bid Price | |
Ask Price | |
Last Trade Time: |