by Ian Harvey
June 04, 2018
Earnings Predictions Already Up 433% - Decision Time - It is often a wise move to exit options trades before an earnings report if there is already substantial profit to be made – in this case a potential profit of 433%!
OUT WHILST THE GOING IS GOOD!
GREED CAN BE THE UNDOING OF A GOOD PROFIT!
Let us review the trades so far this week (Note: the actual trade is not declared as this is a membership situation, and the trades are still applicable).
Coupa Software Inc (NASDAQ: COUP) reported earnings after the market closed today, and was already up to provide 37% potential profit.
Coupa Software reported Q1 EPS of ($0.01), $0.10 better than the analyst estimate of ($0.11). Revenue for the quarter came in at $56.4 million versus the consensus estimate of $51.18 million.
Coupa Software sees Q2 2018 EPS of ($0.08)-($0.10), versus the consensus of ($0.11). Coupa Software sees Q2 2018 revenue of $56-57 million vs $55.6 million expected.
Coupa Software sees FY2018 EPS of ($0.14)-($0.19), versus the consensus of ($0.24). Coupa Software sees FY2018 revenue of $233-236 million vs $230.1 million expected.
……so there is much more profit to be made in this case.
Coupa was up 2.33% before the market closed, and in after-hours trading was up another 1.39%.....therefore, more profit is expected in this situation.
NOW Turning To The other Options Trades for the Week….
Do we exit on already existing profits or leave the companies to report their earnings and hope for bigger profit?
As most 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.
SO….in the following cases is an exit an appropriate decision?
In a very unpredictable market place, as we experienced last week due to the Italian and tariff situations, it may be prudent to exit the above trades with quite a nice profit. Even accounting for the extra trade, in this case a put option, which may, or may not, provide a profit, a nice potential profit of 433% is excellent. Even taking a total loss from this extra trade would still provide a potential profit of 333%.
The Decision Is Yours!
"YOU NEED TO BE IN IT TO WIN IT!"
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