Trade Update And Unofficial Earnings Play
Hello Smart Option Sellers! Gap Inc. (GPS) We successfully filled the adjusted GPS put-sell trade yesterday. Here's what we did: Sold (sold-to-open) the GPS September 2017 $17 put options for an official sale price of $.32 per contract as an opening transaction (sold-to-open). Fills came in a range of $.31 - $.34 per contract yesterday for Smart Option members, so we took the official mark at $.32 per. Good job everyone. If you have not placed your order yet, remember to keep it designated as "GTC" (good-til-cancelled). Unofficial Earnings Trade As mentioned previously, I will offer up earnings plays from time to time in which you can buy cheap options in order to take advantage of a large move in the stock following its earnings announcements. I'm not a fan of buying options (as many of you know), because the win rate is extremely low. Selling options as we do, has a 90+% win rate, so that's what we stick with. But, in order to offer more value to my members (and due to large requests), I will serve up these "fun and speculative" trades because of the opportunity to hit it big. We've had pretty good success so far, so let's keep trying. The key to winning on these earnings plays is to find stocks that have a history of large moves after the announcements, but for some reason or another, the options aren't pricing in those potential large moves. When this is the case, you can buy the options cheaper than they should be, and put much better odds on your side. Qualcomm (QCOM) Today's earnings play is on QCOM. A player in the semiconducter sector, QCOM competes with the likes of Intel (INTC) and Nvidia (NVDA). None of that really matters for trades like this. We just want to make sure the stock moves far enough (in either direction) in order to profit. Since we never know which way the stock will move after announcing earnings, we have to play both sides of the trade - hence, we'll buy both call options and put options. QCOM stock has a history of making large moves after the announcement, typically in the $5 - $10 range. With its stock price currently around $53 per share, you would want to buy options within a $5 radius of the current price of the stock at the time of your entry. If the stock is at $53 when you place your orders, you want to focus on buying the $48 puts, the $48.50 puts or the $49 puts to cover you for a bearish move. On the upside, you want to look at buying the $57 calls, the $57.50 calls or the $58 calls. My recommendation is to try to buy any of these options under $.20 per contract at the time of entry. Remember, you will be buying both the calls and the puts, so your investment is doubled. This trade is for today only! You will use the April 21, 2017 expiration contracts that expire this Friday. QCOM has been involved in some litigation with both Apple (AAPL) and Blackberry (BBRY) of late and may have an effect on its earnings numbers. Even so, we still have to play both sides even if you think this could be a negative issue. The worst case scenario for this trade is if the stock goes completely nowhere after the announcement. That's the death knell for trades like this. All option values of the types we're looking at will just evaporate and become worthless. Just yesterday, Netflix (NFLX) announced earnings and it always has a history of large moves - typically $20 per share or more. The options were pricing that type of move properly as you couldn't get any real cheap options unless you went further than $20 radius around the stock price. And what happened? NFLX moved maybe $3 after the announcement. A total bust for the option buyers. But for QCOM, the options seem to be cheaper than they should be, so there's an opportunity there. Remember the rules: 1. This is an "unofficial" trade, so you can't hold me to it! 2. Buying options is a low probability trade, so there will be many more losses than wins. This is why you only want to buy the really cheapie options. 3. This is one-day trade. You will know very quickly whether it will be profitable or not. 4. Don't go hog wild. This is a "fun" trade, but don't bet the house. The results come out after the close today so I will try to send out another quick alert at that time. I will also send out an alert tomorrow morning on follow-up action. That's all for now. Get those orders in if you choose to do so. You can contact us here. Regards, Lee Let's Grab That Cash!
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