Bonus Free Trade Alert! 530% Gain
January 29th, 2008, 12:18 am. Posted under Market Commentary, Trade Alert !! by AppleOption.
Earning Reports due this week:
Tuesday (unannounced): Yahoo (YHOO)
Wednesday (after the close): Starbucks (SBUX)
Thursday (after the close): Google (GOOG)
For an entire list of company earning reports, check out Yahoo Earning’s Calendar
If you are interested in “playing” the earning’s report… here are some suggested trades.
YAHOO! - Wide Straddle - currently $20.78
Buy to Open the Feb 17.5 PUT for $0.30
Buy to Open the Feb 22.5 CALL for $0.80
Total Debit = $1.10 or less
Breakeven points are $16.39 and $23.61
Exit plan: After earnings we expect ~5-10% stock price change, sell into the excitement which ever option has profited from the earnings. If the stock falls 10% the PUT should become ~$1 or more, where as a 10% gain would cause the CALL too increase to ~$1.80 or more. Selling at this point will create a likely breakeven or better trade, while leaving the other leg open. We then have the remaining 18 days till expiration for the stock to revert to the mean or swing the other way for additional “free” profit.
Technical Analysis: The Yahoo Chart has a strong bearish outlook for the stock. The first level of support is at $19. Last November they traded as high as $34.
UPDATE 1/29/08 : Order should have filled for $1.10 or less. In after hours trading Yahoo fell 10% to $18.72. This will make our 17.5 Puts ~ $1 or more at market open. Sell the put for $1.10 or better!
UPDATE 1/30/08 : $17.50 ranged from 1.50-2 today. Should have been no problem taking the gain! This results in a total trade profit of AT LEAST $0.48 or 43% if you sold at $1.58 and as high as $0.90 for 81.8%.
The trade now has an open 22.50 Call which has 17 days to potential make your more on this trade! But either way it will stay a winner!
UPDATE 2/1/08 :Anyone see the current value of YAHOO? The Call 22.5 which we bought for 0.80 is has traded today from $5-7! You should exit the trade now if you haven’t done so already at $5.35. This results in a return on the call alone of 568% !!!
TRADE CLOSED:The put side cost $0.30 and sold for $0.48 which is 43% return, while the call cost $0.80 and sold for $5.35 which is a 568% return. This total trade cost $1.10 and was sold for $5.83 for a net return of $4.73 or 530% profit.
Starbucks - Straddle - currently $19.66
Buy to Open the Feb 20 PUT for $0.30
Buy to Open the Feb 20 CALL for $0.80
Total Debit = $1.80 or less
Breakeven points are $18.20 (7.6% down) and $21.80 (11.1% up)
Exit plan: Similar to Yahoo, we are playing the earnings momentum change after reporting. Last time SBUX fell from ~$24 to $21.75, while two weeks later return to a high of $23.75. This similar swing should produce a nicely profitable trade. After earnings, sell into the excitement for profit! Then hold onto the remaining leg until it recovers.
Technical Analysis: The Starbucks Chart has a bearish outlook however major support levels sit at $18. Novembers high was $26.50.
UPDATE: 1/30/08 Over the corse of the day Starbucks lost 3.76% and in after hours is down ~2% to $18.80. Your 20 Put was worth $1.50 at the close and should open tomorrow ~$2. Sell for $2 or more. Resulting in a $0.20 profit or 10%, then hold the 20 Call until we rebound in the next 17 days before expiration for additional profit!
UPDATE: 2/1/08 We have made 10% on this trade, in three days. Not bad… have to watch SBUX until expiration.
Google’s Trade recommendation will be posted Wednesday evening. We are watching BIDU extremely closely, they have turned positive and google will likely follow.
- No trade was safely identified.