1:15pm (EST)
Former Dow blue-chipper, Alcoa (AA, $14.68, down $0.06) will announce their earnings after today’s closing bell. Shares have done well since getting booted from the index on September 20, 2013.
The stock was at $8.29 when Alcoa left the Dow club of 30 and recently traded to a 52-week peak of $15.18 in late June. Not quite a double but close enough for a fine cigar.
The company has beat estimates in 3 of the past 4 quarters. There are 17 Wall Street analysts that cover the stock and estimates are calling for the company to earn a profit of $0.12 a share on revenue of $5.64 billion.
The low estimate is for a profit of $0.09 a share that would equate to a 3-cent miss. The high estimate is calling for Alcoa to possibly earn $0.16 a share for a 4-cent beat.
I have recommended shares of Alcoa in the past for both the Daily and Weekly Wrap over the years and I’m usually more bullish than bearish on the stock. However, I will likely sit on the sidelines as far as taking an earnings trade as there are better candidates later in the week and next to possibly play.
The July 15 calls (AA140719C00015000, $0.24, down $0.02) have traded over 3,000 contracts today while the July 15 puts (AA140719P00015000, 0.57, up $0.05) have traded 500 contracts. While sentiment is bullish, the company will likely have to beat estimates on the high-end and raise current quarter estimates to reach fresh highs. An earnings miss could push shares below $13.
These options together might make a good straddle option trade but shares will need to move 8%-10% to get a decent double-digit profit. In other words, I don’t like the risk/ reward with these options.
I would rather watch the action for clues on market direction instead of rolling the dice with Alcoa right now. Again, better plays are ahead over the next 3 weeks and I’m excited about the prospects of finding a monster winner.
Heading into the second half of trading, the Dow is down 134 points to 16,889 while the S&P 500 is lower by 16 points to 1,961. The Nasdaq is declining 68 points to 4,483 and the Russell 2000 is off 19 points to 1,169.
The S&P 500 Volatility Index ($VIX, 12.40, up 1.07) has cleared 11.50 and I mentioned this morning 12.50 could come into play on a continued pullback in the market. The close will certainly be interesting.
I have updated the current trades and while there isn’t a new trade for now, there could be one or two into the close. I am still doing research and chart work but there are a few candidates I like. Stay locked-and-loaded into the close and if I don’t send out an alert by 3pm today, it means I will likely wait until Wednesday to start new positions.
I do have 2 Profit Alerts on options that are up triple-digits so please read the trade instructions carefully.
Closed Trades for 2014: 66-33 – the Weekly Wrap is 19-4 (83%) for 2014 (104-11, or 90% win rate, since 2011) and is designed for traders that want to use options with less risk. 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 we 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 9am and 12pm-1pm 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.
Fortinet (FTNT, $24.91, down $0.37)
September 28 calls (FTNT140920C00028000, $0.45, down $0.20)
Entry Price: $0.55 (6/30/2014)
Exit Target: $1.10
Return: -18%
Stop Target: 55 cents
Action: Shares have traded to a low of $23.07 and below my Stop Target. The options opened at 55 cents and some of you may have closed the trade.
I did not make this a stop limit and I didn’t send out a Trade Alert because I didn’t want to get whipsawed out of the trade. Earnings are due out later this month so I wanted to leave some bullish positions open in case the second wave of support holds. I believe the company will post great numbers and these options will do well on a breakout to new highs. The company is also a takeover candidate.
Rambus (RMBS, $14.03, down $0.21)
August 15 calls (RMBS140816C00015000, $0.45, down $0.10)
Entry Price: $0.60 (6/30/2014)
Exit Target: $1.20
Return: -25%
Stop Target: None
August 16 calls (RMBS140816C00016000, $0.30, down $0.05)
Entry Price: $0.33 (6/30/2014)
Exit Target: $0.65-$1
Return: -24%
Stop Target: None
Action: Support at $14 is being tested but I’m looking for it to hold into the close.
Earnings are tentatively scheduled for next week but there is no hard date listed. I believe the company will beat estimates so I don’t mind staying long.
General Motors (GM, $37.34, down $0.10)
September 32 puts (GM140920P00032000, $0.25, flat)
Entry Price: $0.40 (6/23/2014)
Exit Target: $0.80-$1.20
Return: -38%
Stop Target: None
Action: I would like to see a close below $36 this week.
Limelight Networks (LLNW, $2.87, down $0.08)
September 3 calls (LLNW140920C00003000, $0.35, down $0.05)
Entry Price: $0.15 (6/4/2014)
Exit Target: $0.45
Return: 133%
Stop Target: None
December 3 calls (LLNW141220C00003000, $0.45, down $0.05)
Entry Price: $0.20 (6/4/2014)
Exit Target: $0.60
Return: 125%
Stop Target: None
Action: Close a QUARTER of BOTH positions to lock-in profits. I believe support at $2.75 holds but I want to protect these beautiful gains in case it doesn’t.
Other 2014 Portfolio OPEN positions (2): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around. This means I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly, when the trade closes or if the options expire. Click on the 2014 Portfolio link in the Members Area to view ALL open/ closed trades.
McDonald’s July 95 puts (from May 2014) – continue to hold – shares are on the verge of falling below $100 but the options are running out of time.
Apollo Group August 23 puts (from April 2014) – continue to hold – resistance is at $32 and a close below $30 is needed to get this trade going in the right direction.