Shares rose by 5.0% over nine days, or a +204% annual rate. The options position produced a 130.8% yield on debit for a +5,303% annual rate.
The Internet services company Qihoo 360 Technology Co. Ltd. (QIHU), headquartered in Beijing, China, publishes earnings on Monday after the closing bell.
[QIHU in Wikipedia]
QIHU
I shall use the JAN series of options, which trades for the last time 53 days hence, on Jan. 16.
Ranges
Implied volatility stands at 51%, which is 3.2 times the VIX, a measure of volatility of the S&P 500 index. QIHU’s volatility stands in the 77th percentile of its annual range. In calculating the percentile I threw out the Aug. 24 China Panic implied volatility, which was a strong outlier.
| Week | SD1 68.2% | SD2 95% | Earns |
|---|---|---|---|
| Upper | 79.48 | 92.39 | 71.95 |
| Lower | 53.66 | 40.75 | 61.29 |
| Gain/loss | 19.4% | 38.8% |
The Trade
QIHU has been in a rising trend since Sept. 14, and the trend is confirmed by analysts enthusiasm index, which is quite high a 67%. Of the analysts covering QIHU, 83% have a strong buy recommendation.
However, Zacks Investment Research, which I use as a guide in selecting a strategy, is neutral toward QIHU, with a rank of 3 and no expectation of an earnings surprise.
Earnings are as likely to produce a price rise as a price decline.
Despite Zacks' assessment, the chart and the analyst expectation dispose me toward a bull play, hedged on the downside as much as the risk and return will allow.
sold for a credit and expiring Jan. 17.
Probability of expiring out-of-the-money
| JAN | Strike | OTM |
|---|---|---|
| 62.5 | 59.8% |
The premium is $0.60, which is 24% of the width of the position’s wing. The stock at the time of entry was priced at $66.87.
The risk/reward ratio is 3.2:1.
The short strike provides a zone of profit that covers a $4.37 move to the downside. The biggest immediate move after each of the past four earnings announcements was $5.28, and the average was $3.60.
Decision for My Account
I have entered a position on QIHU as described above.
-- Tim Bovee, Portland, Oregon, Nov. 23, 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.
No comments:
Post a Comment