Unofficial Earnings Play

Unofficial Earnings Play

Hello Smart Option Sellers! Slow week for us so far. But, from time to time, I have opted to give everyone another way to make money by trading options. In this case, it's from buying very speculative, cheap options, right before a company's earnings announcement. We have had some tremendous winners using this method, and of course we've had some losers. As you know, I'm not a fan of buying options at all - except in the case of the strategy that I outline in the Warren Buffett Report (see section below), and on certain occasions, the earnings play speculation. In order to have any chance of making money on an earnings play, you have to choose a stock that has had large moves in the past once the announcement is made, as well as finding undervalued options to buy that represent a fighting chance to explode in price. This is not an easy task. The option market-makers know which stocks have a history of large moves, so they price the options accordingly. But sometimes we are lucky enough to find an exception. Today, we may have just found a trade that's worthwhile. Kroger (KR) KR is a solid grocery store chain that was founded in 1883 and based in Cincinnati, OH. It has thousands of outlets around the country and competes with the likes Wal-Mart, (WMT) Costco (COST), Target (TGT), and many other retail food chains. If you look at its chart here you will see the nasty $10 per share drop it had during the middle of June. This was in direct response to Amazon's buy-out of Whole Foods (WFM). Every other food retailer dropped on that day, as the whole world thought Amazon was going to put everyone out of business. Well, that hasn't exactly happened, and although some stocks have rebounded to a degeree, KR has remained mostly depressed. They announce earnings tomorrow before the opening bell, which means if we want to take a position, we need to do it today before the close of trading. As mentioned above, in order to possibly succeed with this type of option buying, you need to find stocks that have had large moves in the past. KR does not fit this bill. But, it is the first earnings report since the Amazon debacle, and it could make things very interesting. Since we don't know which way the stock will move, we have to buy both a call option and a put option to cover our bases. Yes, this entails two transactions. If the stock moves big enough tomorrow, one of those options will be profitable and the other one won't. As long as the profitable option outweighs the loss on the other, it doesn't matter. You can walk away with a win. The key here is that if earnings have a positive slant in spite of the Amazon hit, the stock could rally. At least $5 per share I think. If earnings show horrible results because of Amazon, then most likley the drop will continue and the stock could potentially lose $5 per share more. What we need to do is buy cheap options within that $5 radius around the current price of the stock, which is currently at $22.30 per share. What do I consider cheap? Any option that is $.20 per contract or less. If you feel you want to get in on this trade, here's what you can choose to do: This trade is completely unofficial and optional. Look to buy the September 8, 2018 (expires tomorrow) $20 or $20.50 put options at $.20 per contract or less for your downside trade, and buy the $24 or $24.50 call options at $.20 per contract or less for your upside trade. You can enter each trade individually as a single transaction paying $.20 per contract for each, or you can buy both at the same time as a single "strangle" spread transaction for $.40 total. It's up to you. If you don't know how to buy the strangle spread, you can either ask your broker for help or you can stick to buying each option separately. The worst case scenario for us would be if the stock goes completely nowhere in price tomorrow. What we need to happen to make a profit is for the stock to have a large move. In this case, that would be roughly $3 per share from where it closes today. That way, one of your purchased options will gain more in value that what you'll lose on the other. If the stock goes nowhere, you can lose on both options. That's the wort case scenario. Make sure you use the options which expire tomorrow September 8, 2017. We won't need any more time than that. The stock will either move or it won't. If you do decide to get involved, be ready to get out of the trade tomorrow one way or another. I will give instructions then. Make sure to check your emails for my alerts. 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 September 8, 2017 expiration contracts that expire this Friday. That's all for now. Let us know if you get involved. You can reach us here Continue to work all other trades as instructed and continue to hold all other open positions as-is. See the Current Portfolio below for current prices & instructions. Quick note on the Current Portfolio - if you are a new subscriber and don't have a position yet on any of our trades, make sure you enter your order at the original recommended sell prices. Do not enter any order unless the current price is at, or higher, than the official recommendation. If you are unsure or have any questions, please ask us! Warren Buffett Report I continue to get good feedback on this new report, so I'll keep this notice going for the time being so everyone has a chance to see it. If you need the link again, click here to read about it. Regards, Lee Let's Grab That Cash!

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