New Unofficial Earnings Plays

New Unofficial Earnings Plays

Hello Smart Option Sellers! Earnings season is in full swing. And due to popular demand and requests from many of our Smart Option Seller members, I have agreed to offer up my best thoughts on ways to capitalize on the explosive moves that can occur after the results are announced. This of course entails buying options - something which is not the main focus of The Smart Option Seller, and certainly something that I'm not a huge fan of (mentioned many, many times). But, I will concede to the fact that when done properly, you can actually have a decent chance of hitting it big as long as you choose your stocks and options correctly. And we've done pretty well so far with the few trades that I have recommended. So today I have two trades for you, one of which is much more risky, so play it as you see fit. Bristol Myers Squibb (BMY) BMY was our very first put-sell play here at The Smart Option Seller. And a profitable one at that. If you were with us from the launch of Smart Option Seller, we took advantage of BMY's large gap move lower (you know how I love that!) in the third week of January. We sold puts on it then, watched the stock rally back up, and then took profits. That's as easy as it gets. BMY stock is currently trading at $54.50 per share and releases earnings before the opening bell tomorrow morning. When doing these earnings plays, I've mentioned that you need to find stocks that have a history of large gap moves after earnings results are released. You wouldn't think of BMY, which is a bell-weather, high quality blue-chip pharmaceutical, for having major moves like that. But if you look at its recent chart history (click here), you will see its recent gap moves. So with that said, here's what you can look at as far as buying BMY's options. You will use the April 28 options which expires in two days. At this point, I would recommend staying within a $2 radius from the current stock price at the time of your entry. Since we don't know which way the stock will move, you should look to buy both the call options and the put options. If you have a feeling one way or the other, you could choose to only concentrate on one side. But when you do that, you usually end up picking the wrong side. With the stock currently at $54.50, take a look at the $52.50 and $53 puts for your downside, and the $56 and $56.50 calls for the upside. Try to stay under $.20 per contract for your most expensive strikes. As long as BMY stock can move more than $2 after releasing earnings, we have a great chance to profit. Amgen (AMGN) This play is much more risky, as we need a very, very large move in the stock after the results are released after the close today. I was debating whether or not to include this one for today, but it's had three major moves since November 2016 alone, and figured it could do it again. See the chart here. With the stock currently at $165 per share, your only good choices for this trade are to look at the $155 puts on the downside and the $175 calls on the upside. Both could be bought for under $.20 per contract. As with BMY, use the April 28 expiration. In order to profit on these options, you would need AMGN stock to move more than $10 higher or more than $10 lower. That's a very tall task. If you play this one, please don't invest too much. $10 moves in stocks are hard to come by. Once again, the worst case scenario for both of these trades is if the stocks go 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. Remember my rules: 1. These are "unofficial" trades, 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. These are one-day trades. You will know very quickly whether it will be profitable or not. 4. Don't go hog wild. These are "fun" trades, but don't bet the house. 5. Use the April 28, 2017 expiration contracts that expire this Friday. I will send an alert tomorrow morning on follow-up action. That's all for now. Get those orders in if you choose to do so. Remember, these trades are optional and unofficial. Continue to send me your questions. You can always contact us here. Regards, Lee Let's Grab That Cash!

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