by Ian Harvey
December 16, 2018
A Quick Review of Last
Volatility continued to be the name of the game for the past week on Wall Street. The Dow, S&P 500 Index (SPX), and Nasdaq Composite (IXIC) suffered from wild swings all week, as investors monitored an onslaught of U.S-China trade headlines. Also, the losses continued due to weak economic data out of China, and news that healthcare icon Johnson & Johnson (JNJ) was aware of asbestos in its baby powder products for years.
However, the tech sector helped ease the drama, looking as if the Nasdaq was up for a weekly win; but didn’t eventuate. The S&P 500 looks as though it is flashing a death cross.
For the week, the Dow Jones Industrial Average (DJI) finished down 1.2% at 24,100.51.
The S&P 500 Index (SPX) was down 1.3% at 2,599.95 for the week.
And the Nasdaq Composite (IXIC) also down at 0.8% for the week at 6,910.67.
The stock market's declines may not be over, but there are plenty of bargains available for those traders using options.
“Caution is the name of the game.” The stock market reacts strongly to even the slightest bit of problem news – or in some cases, no news; or even good news.
The market is now sitting at the lowest level since April and it appears that the decline has not ended!
Now, we see this week being headlined by the December Fed meeting, where a rate hike is expected. Will this actually happen or will common sense prevail where theFed Chair Jerome Powell takes a data-dependent, wait-and-see approach instead of hiking rates again. The post-meeting press conference with Fed Chair Jerome Powell for clues to the future pace of rate hikes will be mover as well.
Also in focus is a potential government shutdown.
CONTROL OF EMOTIONS AND LESS PANIC WILL HELP YOUR PROFIT MARGIN!
Reviewing the Earnings Predictions from Last Week…..
Profiting from trading options was very successful for “Earnings Predictions Members” in the past week. Looking at the potential profit (or maximum), there is a substantial amount of profit left even after paying for a yearly membership of “Earnings Predictions”. Allowing for the fact that it is very difficult to judge the top, and selling for less profit; even taking half of the profits was extremely good!
There were recommendations for five companies that were reporting earnings throughout the week. Four of the options were based on the likelihood that the company would miss the analysts’ expectations and one was a call option; expecting the company to exceed expectations.
This company was Adobe Systems Incorporated (NASDAQ:ADBE), but after Tuesday the sell price of the option was returning a potential profit of 114%. Therefore, the recommendation was to exit the trade before the earnings report was to be announced, giving the trader a total potential profit of 114%. This would also relief any concerns of stock direction after the report.
This was a fortuitous move as the quarterly earnings of $1.83 per share, missed the Consensus Estimate of $1.89 per share, and was far below the whisper number of $1.93.
OUT WHILST THE GOING IS GOOD!
GREED CAN BE THE UNDOING OF A GOOD PROFIT!
“EARNINGS for LAST WEEK”!
|Underlying Stock||Profit/Loss||Cost for Trade||Sell Price|
|Stitch Fix Inc (NASDAQ: SFIX)||209%||$2.10||$6.50|
|American Eagle Outfitters (NYSE:AEO)||0%||$0.75||$0.75|
|Adobe Systems Incorporated (NASDAQ:ADBE)||114%||$7.40||$15.84|
|Costco Wholesale Corporation (NASDAQ:COST)||311%||$3.50||$14.40|
|Ciena Corporation (NYSE:CIEN)||-84%||$1.00||$0.16|
TOTAL POTENTIAL PROFIT - $2,290
YEARLY COST FOR EARNINGS PREDICTIONS MEMBERSHIP - $490…..
This leaves a potential profit of $1,800.
Even taking half of this potential profit - a return of $1,145 leaves a profit of $655 after paying for the yearly subscription - a nice return would be achieved!
YOU NEED TO BE IN IT TO PROFIT!
Options Trades to Consider Based on Expected Earnings Reports:
Monday, December 17
Oracle Corporation (NYSE:ORCL), a provider of products and services that address all aspects of corporate information technology (IT) environments, including application, platform and infrastructure, will report earnings after the market closes. The consensus earnings estimate is $0.78 per share on revenue of $9.53 billion; and the Whisper number is unchanged at $0.78 per share. The company's guidance was for earnings of $0.77 to $0.79 per share. Consensus estimates are for year-over-year earnings growth of 14.71% with revenue decreasing by 0.95%.
ORCL has been in a sideways pattern the last three months after a mixed quarterly report in September.
Despite expanding its foothold in the cloud space, the presence of already established players like Amazon and Microsoft in both the PaaS and IaaS seem to remain a potential headwind.
As well, Oracle no longer intends to provide its cloud revenues and does not give any guidance on SaaS, Cloud PaaS and IaaS. This move is a concern when looking at the overall company's outlook.
Also, stiff competition in the cloud is expected to hurt margins and will make revenue growth difficult, going forward. And, Oracle’s cloud reputation took a further hit in September; when the company said top cloud executive Thomas Kurian was taking time off from the company.
DON'T MISS OUT - MORE TO COME!
Don’t miss out – check out further options trades recommended for the week ahead by becoming a member of Stock Options Made Easy “Earnings Predictions”.
An Important Note: That these suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented.
If you wish to receive more options trading recommendations similar to this, which will help boost your portfolio strategy, check out the other memberships available at Stock Options Made Easy.
When To Exit A Trade Based On Earnings?.....
It is also worth considering, when options trading earnings reports – “Do we exit on already existing profits or leave the companies to report their earnings and hope for bigger profit?”
traders realize, there is a 50/50 chance that the company stock price could go
either way after reporting earnings – even if the report is good, the stock
price could reverse – and if you hold a call option, means depletion of an
already good profit if it exists. A similar situation can be found if you hold
a put option, and a report is not that sound (and you expect a profit from
this) but the stock price can, at times move upwards due to traders bias or
other external conditions......READ MORE.....
The Decision Is Yours!
Before You Trade Consider This Strategy……
"Trading Capital Management" is a key component of your trading strategy. The strategy, on which we base our trades to achieve maximum profit, and to minimize loss, is contingent on using an equal amount of money for each trade.……continue reading this article……
”Success is simple. Do what's right, the right way, at the right time.”
Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.