Dear Momentum Options Subscriber,
I mentioned in yesterday’s Mid-Market Update that the king of the penny-beat, Cisco Systems (CSCO, $29.81, down $1.76), was reporting earnings, and it had a slight surprise for Wall Street on Wednesday after the close. The company actually beat estimates by $0.02, and revenue was higher as well. The problem was that the current forecast came in $0.02-$0.04 below expectations.
The buddy/buddy system didn’t work here, as shares are sliding 5.4% on the news. Shares were shaky heading into the announcement, and this looks like a classic “buy the news, sell the rumor” pullback.
I was tempted to recommend put options ahead of the news, but trading around earnings is always risky. For that reason, I could have used a “strangle” option trade into and after the announcement. However, these situations are very hard to time because of the wild opens that usually accompany earnings plays, as volatility has a huge role and impact in either direction.
These are powerful strategies, but you also want to make sure you are not overpaying and that shares are going to make the move you are expecting. This requires another step of calculations, but these are easy strategies to play, and I recommend learning more about them. They will come in handy in 2017 and perhaps in December, as strangle option trades could be in vogue.
As far as the market goes, the Dow is up 4 points to 18,872, while the S&P 500 is adding 7 points to 2,184. The Nasdaq is up 29 points to 5,224, and the Russell 2000 is higher by 8 points to 1,310.
I have updated our current trades below, so let’s get on it.
Momentum Options Play List
Closed Momentum Options Trades for 2016: 78-31 (72%). All trades are dated and time stamped 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 2:45 p.m. EST.
I hereby disclose that I will be participating in the following trade(s).
Tower Semiconductor (TSEM, $18.01, up $0.51)
TSEM January 19 calls (TSEM170120C00019000, $0.50, up $0.05)
Entry Price: $0.50 (11/16/2016)
Exit Target: $1.00
Stop Target: None
Action: Resistance is at $17.75-$18. Continued closes above $18.25-$18.50 should get $20 in play by mid-January. Support is at $17-$16.50.
Apple (AAPL, $109.63, down $0.36)
AAPL January 115 calls (AAPL170120C00115000, $1.66, down $0.17)
Entry Price: $1.24 (11/15/2016)
Exit Target: $2.50
Stop Target: $1.49 (Stop Limit)
Action: Support is at $109-$108. Resistance is at $110.
Array BioPharma (ARRY, $7.27, up $0.27)
ARRY January 7 calls (ARRY170120C00007000, $1.09, up $0.24)
Entry Price: $0.78 (11/14/2016)
Exit Target: $1.80
Stop Target: None
Action: Resistance is at $7-$7.25. The 52-week high is at $7.27. Support is at $6.75-$6.50.
You can read my previous comments on ARRY in Tuesday’s Pre-Market Update.
Starbucks (SBUX, $55.65, up $0.21)
SBUX January 47.50 puts (SBUX170120P00047500, $0.21, down $0.02)
Entry Price: $0.95 (11/3/2016)
Exit Target: $1.90
Stop Target: $0.12 (Stop Limit)
Action: Resistance is at $55-$55.25 Support is at $55.
Lattice Semiconductor (LSCC, $7.55, down $0.14)
LSCC December 7.50 calls (LSCC161216C00007500, $0.26, flat)
Entry Price: $0.30 (10/12/2016)
Exit Target: $0.60 (Limit Order)
Stop Target: None
Action: Support is at $7.50. Resistance is at $7.75-$8. The 52-week peak is at $7.99.
Viavi Solutions (VIAV, $7.93, flat)
VIAV December 8 calls (VIAV161216C00008000, $0.20, down $0.01)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.14 (Stop Limit)
Action: Resistance is at $8. Support is at $7.60-$7.50.
Editor and Chief Options Strategist