Benefit From a Deluge of Reports
by Ian Harvey
July 24, 2017
The main focus in the week ahead will be earnings reports, with more than 800 companies coming out with quarterly results, including 183 S&P 500 members and 13 Dow stocks. FANG names— Facebook, Amazon and Alphabet — are among the S&P companies reporting, as are Exxon Mobil, Caterpillar, United Technologies, McDonald's, and Boeing.
The earnings season was expected to be strong, and up until last Friday, July 21, there were results from 97 S&P 500 members already out, which have provided a positive and reassuring view of corporate earnings; this is expected to continue with further strengthening through the remainder of this earnings season.
There have been plenty of positives so far from the early start of the earnings season, and members of Stock Options Made Easy have been benefiting from this situation; here are some of these positive aspects:-
This improvement in quarterly performance has been influenced by an economic improvement, jobs growth and oil prices starting to rise.
Options Trades to Consider Based on Expected Earnings Reports:
Monday, July 24
Alphabet Inc (NASDAQ:GOOGL) -- Pricing remains under pressure, both on account of the ongoing FX concerns as well as continued strength in mobile and TrueView. Google’s cloud business trails Amazon’s AWS, Microsoft’s Azure and IBM. Google’s troubles in the EU are mounting.
Option trade to consider: Buy the GOOGL AUG 18 2017 900.000 PUT at approximately $3.50.
Tuesday, July 25
McDonald's Corporation (NYSE:MCD) – There is plenty of optimism about McDonald's earnings report. The stock has risen more than 20% so far this year to make the fast food titan one of the best-performing members of the Dow.
Option trade to consider: Buy the MCD AUG 18 2017 155.000 CALL at approximately $2.55.
Caterpillar Inc. (NYSE:CAT) -- Analysts see earnings growth of 31.4% on average for the next five years, and 15.6% year over year for the most recent quarter. The market expects a strong beat, with a whisper number of $1.32 versus the consensus $1.26.
Option trade to consider: Buy the CAT AUG 18 2017 105.000 CALL at approximately $3.70.
Canadian National Railway (USA) (NYSE:CNI) -- expected to perform well in the second quarter, driven by an improvement in the coal-related scenario which should aid overall volume; likely to beat estimates this quarter.
Option trade to consider: Buy the CNI AUG 18 2017 85.000 CALL at approximately $0.70.
Chipotle Mexican Grill, Inc. (NYSE:CMG) -- Costs to be up approximately 20 to 30 basis points versus the first quarter of 2017; impacting on investors' confidence; Chipotle had to temporarily close one of its Virginia locations following reports, which were later confirmed, of a norovirus outbreak; and John Staszak at Argus downgraded the stock from "buy" to "hold" on Friday morning.
Option trade to consider: Buy the CMG AUG 18 2017 330.000 PUT at approximately $9.00.
Advanced Micro Devices, Inc. (AMD) -- read article for details and recommended options trade -- “Cut-to-the-Chase” Recommendations - Week Beginning - Monday, July 17, 2017”
JetBlue Airways Corporation (NASDAQ:JBLU) – likely to beat earnings with impressive value, momentum and growth; good expansion goals; and extremely good growth in earnings and revenue.
Option trade to consider: Buy the JBLU AUG 18 2017 24.000 CALL at approximately $0.50.
Wednesday, July 26
Facebook Inc (NASDAQ:FB) -- one of the top performing stocks in the market in recent years, and with the stock up 41% in 2017 alone, investor optimism is running high. The company has been growing earnings at a rapid pace, and analysts see earnings growth of 16.5% year over year for its most recent quarter. Facebook has a strong history of topping estimates.
Option trade to consider: Buy the FB AUG 18 2017 165.000 CALL at approximately $4.90.
Gilead Sciences, Inc. (NASDAQ:GILD) – Missed first quarter earnings; but likely to beat this time round; but estimates suggest HIV and other pipeline growth will not be sufficient to offset the margin and revenue erosion caused by the competitive and declining HCV market; particularly without any acquisitions and based on projected decline in revenue, margin, and earnings going forward for the foreseeable future.
Option trade to consider: Buy the GILD SEPT 15 2017 70.000 PUT at approximately $1.20.
Thursday, July 27
Amazon.com, Inc. (NASDAQ:AMZN) -- has continued to increase its focus on a platform approach, and on top of its e-commerce dominance, the company is rapidly expanding its media and cloud services operations; beat its earnings projections last quarter by 43.69%, which should provide investors with a sense of optimism.
Option trade to consider: Buy the AMZN AUG 18 2017 1030.000 CALL at approximately $28.00.
Intel Corporation (NASDAQ:INTC) -- read article for details and recommended options trade -- “Option Trade - Intel Corporation (NASDAQ:INTC) Calls - Thursday, July 06, 2017”
AbbVie Inc (NYSE:ABBV) --Although Humira is doing well, the company is concerned about the product’s long-term prospects owing to the potential biosimilar competition; also a Humira patent litigation a concern. Viekira faces intense pricing and competitive pressure in the HCV market; and the weak performance continues this year with sales expected to decline to $1 billion in 2017.
Option trade to consider: Buy the ABBV SEPT 15 2017 72.500 PUT at approximately $0.65.
Friday, July 28
U.S. oil prices have floundered in recent weeks. By June 21, crude had cratered more than 20% from its February highs and officially plunged into bear territory; down 14.3% for the first half of the year - the worst performance since 1998. ExxonMobil Corp. and Chevron Corp. - the DJIA's two energy giants - were among the 7 Dow stocks that closed the first half with a loss. Both companies experienced sharp declines in price this year, dropping more than 10% year to date when the index (with a rise of 8%) marked its best first-half performance since 2013.
The spectacular boom in U.S. shale production has played havoc with oil prices. Arguably, the biggest development in global oil markets over the last few years, the relentless increase in North American shale output has undermined efforts by OPEC and other major producers' efforts to 'rebalance' the market and prop up prices.
Therefore, expect both XOM and CVX to deliver earnings reports below expectations.
Exxon Mobil Corporation (NYSE:XOM)
Option trade to consider: Buy the XOM AUG 18 2017 80.000 PUT at approximately $1.50.
Chevron Corporation (NYSE:CVX)
Option trade to consider: Buy the CVX AUG 18 2017 100.000 PUT at approximately $1.00.
You will notice that most options trades to consider have short-term expiry dates, as the expected movement of the option’s price should occur just prior to, or shortly after, report of earnings. It is entirely up to the individual trader as to whether they add a stop-loss or not.
Also Note: 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.
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