Dear Momentum Options Subscriber,
I mentioned in Monday’s Mid-Market Update that there were a few earnings trades I was looking at this week, and one of them was a bearish trade on VeriFone Systems (PAY, $20.69, down $7.54). I was also looking at taking a bullish position in Dave & Buster’s Entertainment (PLAY, $45.89, up $4.03).
I shied away from these two trades after learning that Tailored Brands (TLRD) would be announcing earnings after today’s close, but I got good vibes from both of the aforementioned stocks.
VeriFone reported earnings of $0.47 a share on revenue of $532 million yesterday. Wall Street was looking for $0.52 a share on revenue just north of $530 million. The $0.05 miss was bad, but what made matters worse was the company’s adjustment for its third-quarter. Management gave a forecast of $0.40 a share on revenue of $515 million. Analysts had penciled in $0.59 a share on revenue of $552 million.
Today’s freefall to the low $20s was a huge windfall for bearish traders that bought put options. The PAY June 25 puts (PAY160617P00025000, $4.87, up $4.67) closed yesterday at $0.20 and are up an astounding 2,335% today.
The PAY July 25 puts (PAY160715P00025000, $5.10, up $4.75) closed Tuesday’s session at $0.35 and are zooming 1,357% this afternoon.
Meanwhile, Dave & Buster’s reported earnings of $0.72 a share on sales of $262 million. The suits-and-ties were looking for $0.59 a share on revenue north of $251 million. The company also raised guidance for 2016 and announced a share-buyback initiative.
Shares of PLAY are at fresh 52-week peaks today, and the PLAY June 45 calls (PLAY160617C00045000, $1.35, up $0.35) have traded to a high of $3.90.
As far as the market goes, the Dow is advancing 46 points to 17,984, while the S&P 500 is up 4 points to 2,116. The Nasdaq is higher by 10 points to 4,972, and the Russell 2000 is climbing 7 points to 1,187.
I issued a partial Profit Alert for our position in TLRD earlier this afternoon, so be sure to check that out if you haven’t already. Now let’s go check on our current trades.
Momentum Options Play List
Closed Momentum Options Trades for 2016: 46-15 (75%). All trades are dated so new subscribers can look at the past history to see how the trades have played out.
Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades. Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the 9 a.m. and 12 p.m. – 1 p.m. updates. Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.
All prices given in this update are current as of 12:50 p.m. EST.
I hereby disclose that I will be participating in the following trade(s).
Tailored Brands (TLRD, $15.22, down $0.16)
TLRD July 15 calls (TLRD160715C00015000, $1.50, down $0.14)
Entry Price: $1.17 (6/3/2016)
Exit Target: $2.35 (Sold first half on 6/8/16)
Stop Target: $1.25 (Stop Limit on second half)
Action: If you haven’t already done so per the earlier alert, take profits and sell to close the first half of the TLRD July 15 calls at current levels.
Also, set a Stop Limit at $1.25 on the second half of the position. Today’s low has touched $1.30.
Fresh resistance is at $15.75-$16 and the 50-day moving average. A surge to $17-$18 could come on a good quarterly report. Support is at $15-$14.75, with $14 serving as backup on potentially disappointing earnings.
The company is scheduled to announce its latest results after the close today. If shares fall below $15 ahead of today’s close, I may also close the second half of the trade if the Stop Limit is not triggered.
Inovio Pharmaceuticals (INO, $11.17, up $0.08
INO July 12 calls (INO160715C00012000, $0.55, flat)
Entry Price: $0.80 (6/1/2016)
Exit Target: $1.60
Stop Target: None
Action: Support is at $11-$10.75. Resistance is at $11.50-$11.75.
PowerShares QQQ ETF (QQQ, $110.32, up $0.14)
QQQ July 112 calls (QQQ160715C00112000, $0.96, up $0.06)
Entry Price: $1.15 (5/31/2016)
Exit Target: $2.30
Stop Target: $0.55 (Stop Limit)
Action: Support is at $108.50-$108 if $110 fails to hold. Resistance is at $111.50-$112.
Editor and Chief Options Strategist