Unofficial Earnings Play

Unofficial Earnings Play Hello Smart Option Sellers! From time to time, I like to give everyone other ways to potentially make money with options, in addition to our put-selling ways. In this case, it's from buying very speculative, cheap options, right before a company's earnings announcement. We've had some big winners in the past 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 above-mentioned 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. L Brands, Inc. (LB) LB, headquartered in Columbus, OH, is a manufacturer of women's clothing and beauty products. Most are familiar with their brands of Victoria's Secret and Bath & Body Works. LB is part of the volatile "retail" segment that has seen huge swings up and down since Amazon has started to conquer the malls of America, some who call it the retailpocalypse. LB stock has certainly been capable of making large moves around earnings, many times moving $5-$10 right after the announcement. They announce today after the closing bell, which means if we want to take a position, we need to do it 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. LB seems to fit this bill. But, 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, the stock could rally. At least $5 per share I think. If earnings show horrible results, then most likely the stock could potentially lose $5 per share. What we need to do is buy cheap options within that $5 radius around the current price of the stock, which is currently at $48.85 per share. What do I consider cheap? Any option that is $.20 - $.25 per contract or less. If you feel you want to get in on this very speculative trade, here's what you can choose to do: *This trade is completely unofficial and optional. Look to buy the November 17, 2017 (expires this Friday) $45 put options at $.20 per contract or less for your downside trade and buy the November 17, 2017 $52.50 call options at $.20 - $.30 per contract or less for your upside trade. You can enter each trade individually as a single transaction, or you can buy both at the same time as a single "strangle" spread transaction for the combined 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 this trade 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 $4-$5 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. The strike prices of $45 & $52.50 are within that $5 radius around the current price of the stock. 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 Friday November 17, 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 or Friday. 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 November 17, 2017 expiration contracts that expire this Friday. That's all for now. Let us know if you get involved with this trade. Remember, it's optional and unofficial. Continue to hold all other trades as-is. Check the Current Portfolio below for updates & instructions. You can always reach us here

Regards, Lee Let's Grab That Cash!