Unofficial Earnings Play

Unofficial Earnings Play

Hello Smart Option Sellers! Target Corp. (TGT) We closed out our TGT put-sell position successfully the other day due to the fact that they are releasing earnings tomorrow before the open. This was done out of caution knowing that the stock dropped about $9 per share after last quarter's announcement (which could've potentially put our built-up profits in jeopardy), and due to the fact that many retailers are getting walloped at the moment. It never hurts to take a profit, and I would've hated to see it slip away. Now, should we take another speculative position today by buying cheap options on TGT? It worked successfully for us the last time. When trading these earnings plays, I've mentioned that you need to find stocks that have a history of large gap moves after the results are released. TGT certainly has had its fair share of large moves over the past year, but you still need to be able to find cheap options to play it right. No sense in doing these trades if you're not getting a bargain. What do I consider cheap options? Anything price between $.05 - $.20 per contract. And, you should buy them within the radius of which the stock is capable of moving. No sense in buying an option $5 away from the stock price if the stock has a history of only moving $2 after earnings? Dig what I'm saying? One of the downsides here is that the more a stock gaps higher or lower after earnings, the more the market will come to expect it. And that in turn will make it harder to find cheap options to buy that are worthwhile. So, knowing that, it might be a bit harder to profit on this play today. But, I'll put it out there for anyone who's willing to take a shot. We know TGT can move at least $5 to $10 after earnings, but the smaller the radius for the options you can buy for cheap, the better. Here's what you can choose to do (unofficial play): Look to buy both a call option and a put option about $5 - $6 radius around the current stock price when you enter the trade. Since not everyone will enter at the same time, not everyone will enter the same option trades because the stock might be at a different price. Use the May 19, 2017 expiration date (this Friday) and try not to pay more than $.20 per contract for each of the call options and put options. As of now, with the stock at $54.65 per share, you should look at the $49, $49.50 & $50 puts for your downside, and the upside, look at the $59.50, $60 & $60.50 calls. Prices might change a little by the time you read this, so you can tweak the strikes if needed. Since the trend of late is for many of these retail stocks to drop in price after earnings, you may want to lean on the downside a bit more and buy more puts than calls. If you're going to buy 10 contracts total, maybe buy 6 puts and 4 calls, or 7 puts and 3 calls. Up to you. I always say earnings are a crapshoot because I've seen stocks move in unexpected ways even if they beat analyst's expectations. So if you're going to play the game of buying options before earnings, you have to buy both call options and put options. This trade is good for today only. Do not enter these trades tomorrow. Remember the 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 May 19, 2017 expiration contracts that expire this Friday. As mentioned previously, the worst case scenario for these types of trades is if the stock goes completely nowhere after the announcement. That's the death knell for trades like this. All option values we're looking at will just evaporate and become worthless. So, keep that in mind if you don't think TGT is capable of the kind of move we need. Get those orders in if you choose to do so. Remember, you are buying these trades, and they are optional and unofficial. I will send an alert tomorrow morning on follow-up action. That's all for now. Continue to hold all other positions as-is. Contact us here with any questions. Regards, Lee Let's Grab That Cash!

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