Tim Bovee, Private Trader: October 2015

Saturday, October 31, 2015

Monday's Prospects

On Friday, Oct. 30:

Of 517 large-cap stocks and exchange-traded funds in my analytical universe, 11 broke beyond their 20-day price channels, six to the upside and five to the downside.

No symbols giving trading signals survived initial screening.

There is one prospect for a trade coinciding with an earnings announcements.

I shall do further analysis on Monday, Nov. 2.

Potential trades keyed to events

The dates are those of the events, all of them earns announcements. Events prior to the opening bell are marked "am", during the trading day "mid", and after the closing bell "pm".

Monday pm

AIG

Tuesday am

(none)

Methodology

The stocks in my analytical universe all have analyst coverage through the stock-ranking company Zacks Investment Research. Not all of the exchange-traded funds are so covered.

I screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

For symbols whose odds of success are in the top or bottom thirds, suggesting a directional or non-directional trade, respectively, I next screen for 1) suitability of the options grid, including open interest of three figures or greater on the strike prices I would need to use to build a position, 2) implied volatility in the 60th percentile or greater of its 12-month range, and 3) the absence of an earnings announcement within the lifespan of the like options series I would trade; presently the NOV options, trading for the last time on Nov. 20. For symbols with odds of success in the bottom third, I also screen for low implied volatility, in the 40th percentile or below, suggesting a covered call play.

-- Tim Bovee, Portland, Oregon, Oct. 31, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter: Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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 decision decisions for his or her own account, and take responsibility for the consequences.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.Tss s ss'ss

Friday, October 30, 2015

Friday's Outcomes

I entered no new positions.

I exited LVS and GDX, each for a profit.

-- Tim Bovee, Portland, Oregon, Oct. 30, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Friday's Agenda

My one prospective trade today is on V in connection with an earnings announcement. However, implied volatility is middling in relation to the range for the past year, and so I'm declining to go further with my analysis and plan to enter no new positions today.

-- Tim Bovee, Portland, Oregon, Oct. 30, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Thursday, October 29, 2015

Friday's Prospects

On Thursday, Oct. 29:

Of 517 large-cap stocks and exchange-traded funds in my analytical universe, 12 broke beyond their 20-day price channels, nine to the upside and three to the downside.

No symbols giving trading signals survived initial screening.

There is one prospect for a trade coinciding with an earnings announcements.

I shall do further analysis on Friday, Oct. 30.

Potential trades keyed to events

The dates are those of the events, all of them earns announcements. Events prior to the opening bell are marked "am", during the trading day "mid", and after the closing bell "pm".

Friday pm

(none)

Monday am

-- Tim Bovee, Portland, Oregon, Oct. 29, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter: Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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 decision decisions for his or her own account, and take responsibility for the consequences.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.Tss s ss'ss

Thursday's Outcomes

I analyzed STX, SBUX and CVX as trades coinciding with earnings announcements but executed none of them because my trading funds are fully committed at present. I shall keep track of them as paper trades.

-- Tim Bovee, Portland, Oregon, Oct. 29, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

CVX Analysis

The oil and natural gas company Chevron Corp. (CVX), headquartered in San Ramon, California, publishes earnings on Friday before the opening bell.

[CVX in Wikipedia]

CVX

I shall use the DEC series of options, which trades for the last time 50 days hence, on Dec. 18.

Ranges

Implied volatility stands at 33%, which is 2.2 times the VIX, a measure of volatility of the S&P 500 index. CVX’s volatility stands in the 56th percentile of its annual range.

Ranges implied by options and earnings

Week	SD1 68.2%	SD2 95%	Earns
Upper	100.18	110.98	93.92
Lower	78.56	67.76	84.82
Gain/loss	12.1%	24.2%

Implied volatility 1 and 2 standard deviations; maximum earns move
The Trade

I shall take a direction neutral approach.

Iron condor, short the $95 calls and long the $100 calls,
short the $80 puts and long the $75 puts,
sold for a credit and expiring Dec. 19.
Probability of expiring out-of-the-money

DEC	Strike	OTM
Upper	95	74.5%
Lower	80	79.9%

The premium is $1.21, which is 24% of the width of the position’s wings. The stock at the time of analysis was priced at $89.72.

The risk/reward ratio is 3.1:1.

The zone of profit in the proposed trade covers a $7.50 move either way. The biggest immediate move after each of the past four earnings announcements was $4.55, and the average was $2.55.

Decision for My Account

My trading funds are full committed and so I shall pass on the trade. If I had funds available, I would enter a position on CVX as described above.

-- Tim Bovee, Portland, Oregon, Oct. 29, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

SBUX Analysis

The coffeehouse chain Starbucks Corp. (SBUX), headquartered in Seattle, Washington, publishes earnings on Thursday after the closing bell.

[SBUX in Wikipedia]

SBUX

I shall use the DEC series of options, which trades for the last time 50 days hence, on Dec. 18.

Ranges

Implied volatility stands at 34%, which is 2.2 times the VIX, a measure of volatility of the S&P 500 index. SBUX’s volatility stands in the 78th percentile of its annual range.

Ranges implied by options and earnings

Week	SD1 68.2%	SD2 95%	Earns
Upper	70.40	78.20	65.34
Lower	54.80	47.00	59.86
Gain/loss	12.5%	24.9%

Implied volatility 1 and 2 standard deviations; maximum earns move
The Trade

I'm direction neutral in my assessment of SBUX.

Iron condor, short the $67.50 calls and long the $70 calls,
short the $55 puts and long the $52.50 puts,
sold for a credit and expiring Dec. 19.
Probability of expiring out-of-the-money

DEC	Strike	OTM
Upper	67.5	80.7%
Lower	55	82.7%

The premium is $0.64, which is 26% of the width of the position’s wings. The stock at the time of analysis was priced at $62.58.

The risk/reward ratio is 2.9:1.

The zone of profit in the proposed trade covers a $6.25 move either way. The biggest immediate move after each of the past four earnings announcements was $2.74, and the average was $1.69.

Decision for My Account

My trading funds are fully committed so I shall pass on the trade. If I had funds available, I would open a position as described above.

-- Tim Bovee, Portland, Oregon, Oct. 29, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

STX Analysis

The data-storage hardware maker Seagate Technology PLC (STX), with operations headquartered in Cupertino, California publishes earnings on Friday before the opening bell.

[STX in Wikipedia]

STX

I shall use the DEC series of options, which trades for the last time 50 days hence, on Dec. 18.

Ranges

Implied volatility stands at 47%, which is triple the VIX, a measure of volatility of the S&P 500 index. STX’s volatility stands in the 81st percentile of its annual range.

Ranges implied by options and earnings

Week	SD1 68.2%	SD2 95%	Earns
Upper	44.86	51.33	43.31
Lower	31.92	25.45	33.47
Gain/loss	16.9%	33.7%

Implied volatility 1 and 2 standard deviations; maximum earns move
The Trade

Absent directional indicators, I shall construct a non-directional trade.

Iron condor, short the $42 calls and long the $43 calls,
short the $31 puts and long the $30 puts,
sold for a credit and expiring Dec. 19.
Probability of expiring out-of-the-money

DEC	Strike	OTM
Upper	42	80.7%
Lower	31	83.7%

The premium is $0.27, which is 27% of the width of the position’s wings. The stock at the time of analysis was priced at $37.83.

The risk/reward ratio is 2.7:1.

The zone of profit in the proposed trade covers a $5.50 move either way. The biggest immediate move after each of the past four earnings announcements was $4.92, and the average was $2.13.

Decision for My Account

I'm fully committed, and so I'm passing on the trade due to lack of tradable funds. If I had uncommitted funds, I would take the trade.

-- Tim Bovee, Portland, Oregon, Oct. 29, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Thursday's Agenda

Trading signals on Wednesday produced two potential time spreads, BIIB and FITB. The marks that identify such candidates are low historical odds of a bull signal being valid, and low implied volatility in relation to the history of the past year.

BIIB and FITB both fail on implied volatility. In each case it is just a bit too high. I plan no further analysis today of those two symbols.

The market continues to plow through peak earnings season, producing six potential trades coinciding with announcements of financial results.

Three symbols failed screening, however. ABBV and XOM have overly low implied in relation to the past year's history, and MYL has insufficient open interest at strike prices I would need to build a position. I have tossed the three into the Forget-About-It Pile and shall consider them no more today.

Three symbols survived screening: CVX, SBUX and STX. I shall do full analyses on them in order to reach a final decision on a trade.

There is a caveat. We are, as I noted, deep into earnings season and I am heavily committed, with 29 positions on the list going into the day. In other words, my trading resources are running short. I shall proceed with analyses, even if the cupboard of tradable funds is bare.

-- Tim Bovee, Portland, Oregon, Oct. 29, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Wednesday, October 28, 2015

Thursday's Prospects

On Wednesday, Oct. 28:

Of 517 large-cap stocks and exchange-traded funds in my analytical universe, 17 broke beyond their 20-day price channels, 15 to the upside and two to the downside.

No symbols giving trading signals with high odds of success survived initial screening. High-odds symbols are candidates for directional trades.

Two symbols with trading signals having low odds of success survived initial screening, both having broken out to the upside. Low-odds symbols are candidates for non-directional trades and time spreads.

There are six prospects for trades coinciding with earnings announcements.

I shall do further analysis on Thursday, Oct. 29.

Trading signal survivors

High-odds
Bull

(none)

High-odds
Bear

(none)

Low-odds
Bull

BIIB

FITB

Low-odds
Bear

(none)

Potential trades keyed to events

The dates are those of the events, all of them earns announcements. Events prior to the opening bell are marked "am", during the trading day "mid", and after the closing bell "pm".

Thursday pm

SBUX

Friday am

ABBV

XOM

MYL

CVX

STX

-- Tim Bovee, Portland, Oregon, Oct. 28, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter: Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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 decision decisions for his or her own account, and take responsibility for the consequences.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.Tss s ss'ss

Wednesday's Outcomes

I opened positions in RRC and GNC but passed on WDC after analysis and MAR and NXPI without full analysis.

The RRC and GNC fills were difficult; I succeeded less than an hour before the closing bell only after foregoing some premium. Even so, the givebacks left the positions within my guidelines.

I exited LLY after the profit exceeded half of its potential, thereby reducing time risk.

I rolled forward the short leg of my UNG time spread to a different price and expiration.

-- Tim Bovee, Portland, Oregon, Oct. 28, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Wednesday's Agenda update

In "Wednesday's Agenda" I identified five finalists for analysis, all them in connection with earnings announcements.

I've analyzed RRC, WDC and GNC.

As I approach the last two, MAR and NXPI, I find that that open interest on the options grids has degraded to the point where I can no longer construct a trade.

My goal is for the strike prices I use in a trade to have triple-digit open interest or greater. That's not the case with the last two symbols.

So I'm cutting them from the prospects list. I plan no further analysis of MAR and NXPI.

-- Tim Bovee, Portland, Oregon, Oct. 28, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

GNC Analysis

Update 12/19/2015: The call options remaining in my GNC position expired without value for maximum profit.

Shars declined by 20.4% over 52 days, or a -143% annual rate. Over the lifetime of the position, the options produced a -31.3% loss on debit, or a -219% annual rate.

Update 12/1/2015: GNC fell below the lower boundary of its iron condor into unprofitable territory. I'm bearish the stock, and indeed the market as a whole, so I exited the puts, transforming the position into a bear call spread profitable anywhere below $47.50.

This strategy mitigates or erases the loss, although the potential profit is quite small. My strategy will be to let the calls expire worthless on Dec. 18.

The health and wellness products retailer GNC Holdings Inc. (GNC), headquartered in Pittsburgh, Pennsylvania, publishes earnings on on Thursday before the opening bell.

[GNC in Wikipedia]

GNC

I shall use the DEC series of options, which trades for the last time 51 days hence, on Dec. 18.

Ranges

Implied volatility stands at 62%, which is 4.1 times the VIX, a measure of volatility of the S&P 500 index. GNC’s volatility stands in the 74th percentile of its annual range.

Ranges implied by options and earnings

Week	SD1 68.2%	SD2 95%	Earns
Upper	46.65	55.42	43.18
Lower	29.09	20.32	32.56
Gain/loss	23.2%	46.4%

Implied volatility 1 and 2 standard deviations; maximum earns move
The Trade

Analyst opinion is neutral regarding any earnings surprise, and I shall structure a direction-neutral position.

Iron condor, short the $45 calls and long the $47.50 calls,
short the $30 puts and long the $27.50 puts,
sold for a credit and expiring Dec. 19.
Probability of expiring out-of-the-money

DEC	Strike	OTM
Upper	45	85.9%
Lower	30	80.9%

The premium is $0.55, which is 22% of the width of the position’s wings. The stock at the time of entry was priced at $38.72.

The risk/reward ratio is 3.5:1.

The zone of profit in the proposed trade covers a $7.50 move either way. The biggest immediate move after each of the past four earnings announcements was $5.31, and the average was $4.66.

Decision for My Account

I've opened a position on GNC as described above.

-- Tim Bovee, Portland, Oregon, Oct. 28, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

WDC Analysis

The data storage equipment maker Western Digital Corp. (WDC), headquartered in Irvine, California, publishes earnings on Wednesday after the closing bell.

[WDC in Wikipedia]

WDC

I shall use the DEC series of options, which trades for the last time 51 days hence, on Dec. 18.

Ranges

Implied volatility stands at 45%, which is triple the VIX, a measure of volatility of the S&P 500 index. WDC’s volatility stands in the 82nd percentile of its annual range.

Ranges implied by options and earnings

Week	SD1 68.2%	SD2 95%	Earns
Upper	79.44	90.88	75.69
Lower	56.56	45.12	60.31
Gain/loss	16.80%	33.6%

Implied volatility 1 and 2 standard deviations; maximum earns move
The Trade

Analysts on balance expect a positive earnings surprise form WDC and I shall structure the position as a bull play.

Bull put spread, short the $65 puts and long the $60 puts,
sold for a credit and expiring Dec. 19.
Probability of expiring out-of-the-money

DEC	Strike	OTM
	65	57.7%

The premium is $1.39, which is 28% of the width of the position’s wing. The stock at the time of analysis was priced at $67.92.

The risk/reward ratio is 2.6:1.

The strike is $2.92 below the market price. The biggest immediate move after each of the past four earnings announcements was $7.69, and the average was $3.49.

Open interest on the options grid is extremely concentrated, with the $65 put have five-figure open interest and the rest being in the double digits.

Decision for My Account

The low open interest on strike prices I need to construct my position is a deal killer and I'm passing on the trade. I won't be opening a position on WDC in connection with this earnings announcement.

-- Tim Bovee, Portland, Oregon, Oct. 28, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

RRC Analysis

Update 12/4/2015: RRC attained 65% of its potential profit and I exited to avoid further risk.

Shares declined by 7.0% over 37 days, or a +69% annual rate. The options position produced a +185.71% yield on debit for a +1,832% annual rate.

The natural gas and oil company Range Resources Corp. (RRC), headquartered in Forth Worth, Texas, publishes earnings on Wednesday after the closing bell.

[RRC in Wikipedia]

RRC

I shall use the DEC series of options, which trades for the last time 51 days hence, on Dec. 18.

Ranges

Implied volatility stands at 73%, which is 4.9 times the VIX, a measure of volatility of the S&P 500 index. RRC’s volatility stands in the 97th percentile of its annual range.

Ranges implied by options and earnings

Week	SD1 68.2%	SD2 95%	Earns
Upper	37.89	46.02	32.44
Lower	21.65	13.52	27.10
Gain/loss	27.3%	54.6%

Implied volatility 1 and 2 standard deviations; maximum earns move
The Trade

Analysts hold a strong opinion that RRC will produce a negative earnings surprise. I shall structure the position as a bear vertical spread.

Bear call spread, short the $30 calls and long the $32.5 calls,
sold for a credit and expiring Dec. 19.
Probability of expiring out-of-the-money

DEC	Strike	OTM
	30	57.7%

The premium is $0.80, which is 32% of the width of the position’s wing. The stock at the time of analysis was priced at $28.73.

The risk/reward ratio is 2.1:1.

The strike is $1.04 above the market price. The biggest immediate move after each of the past four earnings announcements was $2.67, and the average was $1.24.

Decision for My Account

I've opened a position on RRC as described above.

-- Tim Bovee, Portland, Oregon, Oct. 28, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Wednesday's Agenda

See the update here.

Out of seven opportunities coinciding with earnings announcements, five have sufficiently high implied volatility to support a trade. I shall do a full analysis of each before making a final trading decision.

The five finalists, in descending order of implied volatility, are RRC, WDC, GNC, MAR and NXPI,

The two prospects that didn't make the final cut due to low implied volatility are MO and WMB.

-- Tim Bovee, Portland, Oregon, Oct. 28, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Tuesday, October 27, 2015

Wednesday's Prospects

On Tuesday, Oct. 27:

Of 517 large-cap stocks and exchange-traded funds in my analytical universe, 11 broke beyond their 20-day price channels, eight to the upside and three to the downside.

No symbols giving trading signals survived initial screening.

There are seven prospects for trades coinciding with earnings announcements.

I shall do further analysis on Wednesday, Oct. 28.

Potential trades keyed to events

The dates are those of the events, all of them earns announcements. Events prior to the opening bell are marked "am", during the trading day "mid", and after the closing bell "pm".

Wednesday pm

NXPI

RRC

WDC

MAR

WMB

Thursday am

GNC

-- Tim Bovee, Portland, Oregon, Oct. 27, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter: Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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 decision decisions for his or her own account, and take responsibility for the consequences.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.Tss s ss'ss

Tuesday's Outcomes

I entered two positions coinciding with earnings announcements, on TWTR and MDLZ, and a time spread on GS after it gave a low odds, low volatility bull signal.

-- Tim Bovee, Portland, Oregon, Oct. 27, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

GS Analysis

Update 11/17/2015: The short leg of GS moved into loss-making territory. On time spreads, that generally means that the long leg becomes profitable, and so it was in this case.

I've become more directionally bearish in my assessment of the GS chart, and I decided to take the profits and run rather than roll the short leg forward.

Shares rose by 3.0% over 21 days, or a +52% annual rate. The options position -- long leg and short leg -- produced a +15.9% yield on debit, for a +276% annual rate.

The investment bankers Goldman Sachs Group Inc. (GS), headquartered in New York City, gave a bull signal on Monday. With low implied volatility and low historical odds of following through on bull signals, it is a candidate for a time spread.

[GS in Wikipedia]

GS

For the short leg, I shall use the NOV series of options, which trades for the last time 52 days hence, on Dec. 18. For the long leg, I shall use the APR 2016 series, which completes trading 171 days out on April 15.

Odds

GS has completed four bull signals in the pst year. One was successful, yielding 6.6% over 81 days. The three unsuccessful trades on average lost 2.3% over 17 days each.

Volatility

Implied volatility stands at 23%, which is 1.5 times the VIX, a measure of volatility of the S&P 500 index. GS’s volatility stands in the 20th percentile of its annual range.

The Trade
Diagonal, long the $185 calls
sold for a credit and expiring April 16, 2016
Probability of expiring in-of-the-money

APR	Strike	ITM
	185	47.6%

Diagonal, short the $187.50 calls
sold for a credit and expiring Nov. 21
Probability of expiring out-of-the-money

NOV	Strike	OTM
	187.5	56.7%

The premium on the long leg was $10.85, and for the short leg, the premium is $3.05. The stock at the time of entry was priced at $186.25.

Decision for My Account

I've opened a position on GS as described above.

-- Tim Bovee, Portland, Oregon, Oct. 27, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

MDLZ Analysis

Update 11/13/2015: I exited MDLZ with profit at 80% of its maximum potential, thereby avoiding further time risk.

Shares declined by 6.5% over 17 days, or a -140% annual rate. The options position produced a +400.0% yield on debit for a +8,588% annual rate.

The snack food and beverage company Mondelez International Inc. (MDLZ), headquartered in Deerfield, Illinois, publishes earnings on Wednesday before the opening bell.

[MDLZ in Wikipedia]

MDLZ

I shall use the DEC series of options, which trades for the last time 52 days hence, on Dec. 18.

Ranges

Implied volatility stands at 34%, which is 2.2 times the VIX, a measure of volatility of the S&P 500 index. MDLZ’s volatility stands in the 77th percentile of its annual range.

Ranges implied by options and earnings

Week	SD1 68.2%	SD2 95%	Earns
Upper	52.65	58.58	48.88
Lower	40.77	34.84	44.54
Gain/loss	12.7%	25.4%

Implied volatility 1 and 2 standard deviations; maximum earns move
The Trade

I have no clear directional guidance although, for this particular earnings announcements, I'm leaning bearish for this earnings announcement and shall construct the trade that way, skewing as much to the upside as possible.

Bear call spread, short the $48 calls and long the $50 calls,
sold for a credit and expiring Dec. 19.
Probability of expiring out-of-the-money

DEC	Strike	OTM
	48	62.3%

The premium is $0.65, which is 33% of the width of the position’s wing. The stock at the time of entry was priced at $46.76.

The risk/reward ratio is 2.1:1.

The strike is $1.24 above the market price. The biggest immediate move after each of the past four earnings announcements was $2.17, and the average was 1.78.

Decision for My Account

I've opened a position on MDLZ as described above.

-- Tim Bovee, Portland, Oregon, Oct. 27, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

TWTR Analysis

Update 11/9/2015: I've exited TWTR for a loss. After the earnings announcement TWTR remained barely profitable within the structure of my bull put spread. It gradually drifted lower into unprofitabilit, facing me with a decision.

I chose to take the loss because I am bearish the market. TWTR, which expires in late December, had time value left, and I saw little chance that a retracement to the upside would repay me for allowing that time value to tick-tock away.

Shares declined by 11.3% over 13 days, or a -318% annual rate. The options position produced a -57.5% loss on debit, for a -1,053% annual rate

The social networking platform Twitter Inc. (TWTR), headquartered in San Francisco, California, publishes earnings on Tuesday after the closing bell.

[TWTR in Wikipedia]

TWTR

I shall use the DEC series of options, which trades for the last time 52 days hence, on Dec. 18.

Ranges

Implied volatility stands at 73%, which is 4.6 times the VIX, a measure of volatility of the S&P 500 index. TWTR’s volatility stands in the 89th percentile of its annual range.

Ranges implied by options and earnings

Week	SD1 68.2%	SD2 95%	Earns
Upper	39.37	47.72	40.41
Lower	22.67	14.32	21.63
Gain/loss	26.9%	53.8%

Implied volatility 1 and 2 standard deviations; maximum earns move
The Trade

I am bullish TWTR based on analyst expectations of a positive earnings surprise.

Bull put spread, short the $30 puts and long the $27 puts,
sold for a credit and expiring Dec. 19.
Probability of expiring out-of-the-money

DEC	Strike	OTM
	30	52.1%

The premium is $1.10, which is 37% of the width of the position’s wing. The stock at the time of entry was priced at $31.22.

The risk/reward ratio is 1.7:1.

The strike is $1.22 below the market price. The biggest immediate move after each of the past four earnings announcements was $9.39, and the average was $8.56.

Decision for My Account

I've opened a position on TWTR as described above.

-- Tim Bovee, Portland, Oregon, Oct. 27, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.

On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader

Disclaimer

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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.