Tuesday's Agenda

I have four potential earnings plays on my desk today: AAPL, BIIB,  HES and T. My goal for the day is to enter no more than two new positions.

BIIB is a roll forward of an bear call spread earnings play entered in October 2015. The trade went bad during the autumn countertrend reversal to the upside and I have been rolling it forward ever since to reduce the loss and, with luck, turn it into a profit.

Average volume on BIIB is lower than I'm doing these days but, since it's a roll, I'll beak the rule.

Implied volatility on T stands in the 65th percentile of its recent range. My present cut-off is 66%, so T is the least attractive option.

That leaves two.

HES has the higher implied volatility, in the 95th perccntile, while AAPL's is in the 82nd percentile.

AAPL has the better strike price distrubition with an interval index of 20, compared to an index of 15 for HES. (The interval index is a measure of granularity on the options grid;  the number of strike prices within the price of one share. Higher is better.)

HES is very high beta, 1.76, while AAPL's is 0.91. Generally, for earnings plays, I prefer lower beta, which reduces the chance of a move outside the zone of profit.

So my priorities are these: BIIB first, then AAPL If I'm still below my two-trade maximum for the day, then I'll look at HES. I'll look further at T only if all the other prospects fail analysis.

-- Tim Bovee, Portland, Oregon, Jan. 26, 2016

References

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

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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.

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Based on a work at www.timbovee.com.