Monday, January 5, 2015

Monday's Finalists

The lone survivor of the early rounds of analysis (see "Monday's Prospects") has also neatly sliipped past the later rounds.

The Toronto mining company Agnico Eagle Mines Ltd. (AEM) meets nearly all of the requirements for a very near term volatility play: High average volume, narrow bid/ask spread, high implied volatility, All that's lacking is Weekly options in its inventory, and that's not a deal-breaker.

The chart has been in a well-defined uptrend since mid-December, although it has hit resistance established in November and paused for the day, at least early in the session.

What it comes down to is opportunity cost.

AEM publishes earnings on Feb. 11. In the normal course of things, implied volatility will continue to rise until the earnings announcement and then will drop sharply, providing a nice nudge toward profitability of any short options spreads sold for a credit and expiring in the front month,

The earnings announcement will provide the better opportunity for profit because of the way implied volatility behaves.

If earnings were three months or more away, I could make a reasonable argument for trading immediately and then again at earnings.

There is no need to tie up funds in a position this close to the announcement.

Despite AEM's attractiveness,  I shall wait. I shall open no new positions based on Friday's markets.

From a broader perspective, I start getting earnings-associated trading opportunities in abundance beginning Tuesday, Jan. 6, as the next announcement season kicks in. Far better to keep funds free for those trades rather than tying the money up in a lower probability trade.

-- Tim Bovee, Portland, Oregon, Jan. 5, 2015


My shorter-term trading rules can be read here. My longer-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here. My volatility trading rules can be read here.


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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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