Of 483 large-cap stocks and exchange-traded funds in my analytical universe, two broke beyond their 20-day price channels, one to the upside and one to the downside. Neither survived initial screening.
There are 13 prospects for trades coinciding with earnings announcements.
I shall do further analysis on Tuesday, April 26.
Earnings season began April 11. The higher pace of announcements will continue for about four weeks from that date.
by Laurentiu Damir
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".
All have implied volatility relative to their most recent ranges that is too low to meet my standard, which is the 60th percentile or greater.
In addition, eight have low open interest at option strike prices important to building a trade. They are ADT, BEN, BHI, CMCSA, EXC, SO TMUS and UTX.
Implied volatility and open interest can change quickly, and I shall make final decisions on going forward with a full analysis after the opening bell, discussing them 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 25, 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.
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