Tim Bovee, Private Trader: Earnings Prospects 5/30-6/3

Thursday, May 26, 2016

Earnings Prospects 5/30-6/3

Note: Edited to remove two symbols -- CTRP and MDT -- which, if they met my standards, would be prospects for the May 27 rather than the May 30. Neither has an options grid with sufficient open interest to qualify for further analysis.

Companies continue to publish earnings at a snail's pace as we slog our way through the swamp between earnings seasons. The next earnings crunch begins July 11.

Out of 89 earnings announcements scheduled for the week of May 30 through June 3, only two meet my basic criteria for price and volume. I require that the price be $30 or higher and average volume 1 million shares a day or higher.

action	sym	earns date	am/mid/pm
5/31/2016	KORS	6/1/2016	am
6/2/2016	AVGO	6/2/2016	pm

The "action" column is the date when I will make a final decision on whether to proceed to a full analysis and possibly a trade.

Of the two, KORS has an open interest distribution on its options grid that would make it difficult if not impossible to construct a trade. I require open interest on all legs of an options spread to be in the triple digits or more.

Moreover, neither symbol at this point has implied volatility sufficiently high on an annual basis to support my strategy of selling options for a net credit. In later stages of analysis I calculate implied volatility as a percentile of its most recent range. For today's quick-and-dirty first look I'm using the percentile of the annual range, which is provided by my trading platform.

Both the distribution of open interest on the grid and the level of implied volatility can change rapidly, so neither is disqualifying at this point, and indeed won't be until the action date.

-- Tim Bovee, Portland, Oregon, May 26, 2016

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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.

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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.