Out of 62 companies publishing earnings from May 23 to May 27, only two made it on to my list as qualifying for consideration as earnings plays.
One reason for the slim pickings is the availability of an options series. My guideline for series selection is no less than 30 days out from expiration and no more than 60 days.
Many symbols don't have options series for July, and some also lack a series for August.
On Monday the June series will be 27 days away from expiration; the July series, 55 days; the August series, 89 days; and the September, 118 days. Only the July series qualifies at present.
Why 30 days and 60 days? It's a trade-off between premium -- my potential profit -- and time decay -- a mechanism that helps earn me that profit.
The closer to expiration a position is, the faster it time decay. I enter positions by selling option spreads for a net credit, and therefore, a faster time decay allows me to buy the positions back for less.
The farther from expiration a spread is, the larger its premium. That increases the amount I can get when selling a spread at the outset of a position.
My goal is to get as close as possible to 42 days -- six weeks. If a trade is especially attractive, I will bend the rules. But none of the disqualified symbols -- WSM, PVH and ULTA -- is worth going to that extreme.
The earnings prospects for the week to come with the day that I shall complete analysis as possible trade, the earnings publication date and the time of day, either before the opening bell (am) or after the closing bell (pm):
| action | sym | earns date | am/mid/pm |
| 5/24/2016 | INTU | 5/24/2016 | pm |
| 5/25/2016 | COST | 5/25/2016 | pm |
-- Tim Bovee, Portland, Oregon, May 19, 2016
by John Tamny |
References
Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.
Elliott wave analysis tracks patterns in price movements. StockCharts has a good explainer. The principal practioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading.
Alerts
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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.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.
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