Monday, April 11, 2016

Tuesday's Prospects

On Monday, April 11:

Of 470 large-cap stocks and exchange-traded funds in my analytical universe, seven broke beyond their 20-day price channels, one to the upside and six to the downside.

No symbols giving trading signals with high odds of success survived initial screening.

One symbol with a trading signal having low odds of success survived initial screening, having broken out to the downside. Low-odds symbols are candidates for non-directional trades and time spreads.

There are six prospects for trades coinciding with earnings announcements. The earnings prospects cover earnings announcements that I would normally analyze on both Tuesday and Wednesday. However, due to a scheduling conflict I shall be away from my desk for most of the trading session.

I shall do further analysis on Tuesday, April 12.

Earnings season began April 11. The higher pace of announcements will continue for about four weeks.

A book from my library →

Trading signal survivors





NKE has implied volatility too low to support a trade that relies on shorting options for a net credit. Volatility relative to the most recent range stands in the 34% percentile; I require a minimum of the 60th percentile. I've listed it as a prospect on case it shows higher volatility on Tuesday.

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".

Tuesday pm
Wednesday am

Wednesday pm
Thursday am

All of the potential earnings plays had implied volatility that was too low to trade as of Monday's closing bell, ranging from the 46th percentile for PACW down to the 21st percentile for JPM. I require relative volatility in the 60th percentile or higher.

Moreover,  PACW, PGR and PNC have overly low open interest at strike prices important to constructing a trade. I require any strike used in a trade to have three-figure open interest.

I'll make final decisions on trading after the opening bell on Tuesday and shall report those decisions in the Agenda post.


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.

-- Tim Bovee, Portland, Oregon, April 11, 2016


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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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.

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