The next six weeks see about 80% of the stocks in the market report earnings.
This makes it extremely difficult to pick plays. Since we don't want to hold over an earnings report it severely limits the number of potential plays.
July premiums are virtually zero so I went out to August and only looked at companies with earnings after August option expiration. Since that is past the flood of major companies the available candidates were scarce. Not only do they have to report after August expiration but they need to have a positive chart and enough velocity or volatility to produce a decent premium in the current market.
I looked at several hundred candidates and only came up with about 10 possible plays.
I am only repeating this every earnings cycle so everyone understands why there is not a long list of name brand companies in the new plays. If you want to risk the earnings reports I understand but I do not.
The market should be positive again on Tuesday as a result of the follow through on the Russell index reconstitution. After Tuesday it will depend on the ADP and Nonfarm payroll reports. Volume is going to be ridiculously low and the market could either go stagnant or turn volatile on some unexpected economic results. At this point I am voting for stagnant with a slight upward bias.
While nobody knows for sure and quite a few people are expecting a summer decline I would caution you not to overextend your personal portfolio. Take smaller positions and only those you feel comfortable holding through some market volatility.
I adjusted stop losses again to avoid being knocked for losses if a low volume summer decline suddenly appears.
Send Jim an email
Long Term Positions
Click for 2014 Statistics through February
Click for 2013 Statistics
Current Position Changes
Here are the earnings dates for our current positions. We need to be out of the positions before the earnings. That is not applicable for the long term positions or stock held for future call writing. Covered call positions will be evaluated the week before the expiration. Most of our current calls expire in July and will not be a problem. Some don't.
AAL - 7/17
LGF - 8/28
ISIS - 8/05
FEYE - 8/05
GTAT - 8/06
YNDX - 7/24
ITMN - 7/31
VNET - 8/21
CLVS - 8/07
YOKU - 8/21
UBNT - 8/07
NLNK - 8/05
AMBA - 9/02
MMYT - 8/20
ARWR - 8/07
GOGO - 8/07
FEYE - FireEye Short Put (Close)
FEYE has rallied $5 from our entry point and the short July $32 put is now $9 OTM and has declined to ten cents. There is no reason to continue holding this put and the associated risk. Close the position.
Close July $32 Put, entry $2.00, currently .10, +1.90 gain
YELP - Yelp Inc (Closed)
The July $57.50 put we sold for $2.40 had declined to 15 cents and there was no further reason to keep this position open. We had nothing to gain and a lot to lose if an unexpected event were to occur. I recommended we close it on June 24th.
Closed YELP July $57.50 Put, entry $2.40, exit .09, +2.31 gain.
GBX - Greenbrier (Closed)
Our Greenbrier July $50 put we sold for $1.25 had declined to 30 cents. GBX shares had declined for three days. Rather than hold the position to gain another 10-15 cents I recommended we close it to reduce our risk. GBX is currently at $59 and we have a $50 put so there is little chance of a $9 drop but stranger things have happened.
Closed GBX July $50 Put, entry $1.25, exit .33, +.92 gain.
CLVS - Clovis Oncology (Closed )
The bounce in Clovis is fading. We had a short July $45 put we launched two weeks ago and it is currently at breakeven with the stock declining. I recommendrd we close this position and put our money to work elsewhere.
Closed CLVS July $45 put, entry $5.60, exit $5.60, breakeven.
IOC - Interoil Corp (Stopped)
Burned again by IOC. The rebound to $69 failed and the stock dropped -$8 in three days to $61. We were stopped out at $62.85 for a loss.
Closed IOC shares, entry $66.34, exit $62.85, -3.49 loss
Closed Sept $70 call, entry $3.40, exit $2.17, +1.23 gain
Net loss -2.26
New Short Put Recommendations
MMYT - MakeMyTrip Ltd
MakeMyTrip is an online company providing travel products for India and internationally. Its services include airline tickets, hotel bookings, rail tickets, bus tickets, rental cars, etc. The stock is exploding higher after failing its annual report on June 6th and then announcing a partnership with TrustYou, an online reputation management company. TrustYou will verify reviews posted by customers to make sure they are not paid posters or plants trying to ruin MMYT with bad reviews that benefit other websites. In the latest quarter they earned 55 cents compared to a loss of 73 cents in the comparison quarter.
India is slowly entering the world of online travel and MMYT may be poised to capture a large share of that growth.
The stock is in definite rally mode with a new high on Monday. I am going to trail this with a tight stop loss.
Earnings August 20th.
Sell short MMYT Aug $35 Put, currently $2.55, stop loss $32.45
LGF - Lions Gate Entertainment
Lions Gate was crushed back in March after a quarter without any significant movie openings. The trailers for the next movie in the Hunger Games series began showing last week and the stock began to rebound. This is typical. The stock runs up ahead of movie openings and then declines after they open.
The next Hunger Games movie is Mockingjay and opens on November 21st.
Earnings August 28th.
Sell Aug $28 put, currently $1.05, no initial stop
These were some plays on my hot list that did not make the cut. I am not recommending them but if you need something else to play I would look at these.
All have earnings after August expiration.
TSL Aug $13 Call $.96
CRM Aug $55 Put $1.30
VSAT Aug $55 Put $1.50
QIWI Aug $35 Put $1.00
YOKU Aug $23 Put $1.25
SAFM Aug $90 Put $2.45
SINA Aug $52.50 call $2.40
New Covered Call Recommendations
VNET - 21Vianet Group
21Vianet Group, Inc. provides carrier-neutral Internet data center services to Internet companies, government entities, blue-chip enterprises, and small- to mid-sized enterprises in the People's Republic of China. It offers hosting and related services to house servers and networking equipment in its data centers, and connects them through a data transmission network; and other hosting related value-added services.
The company launched an offering of 2 billion RMB bonds due 2017 and they were snatched up in a heartbeat. The company is growing extremely fast in China and Canaccord expects to see an acceleration of earnings.
Earnings August 21st.
The chart is showing a narrowing of the range at $30 in what looks like a potential breakout in the near future.
Buy-write Aug $30 call, currently $29.97-$1.90, stop loss $28.65
YOKU - Youku Tudou
Youku Tudou Inc. operates as an Internet television company in the People's Republic of China. Its Internet television platform enables consumers to search, view, and share video content across various devices. The company's services for users comprise online video content library consisting primarily of professionally produced content, including television serial dramas, movies, current event reports, variety shows, and music videos.
The stock sold off hard in March and the rebound began two weeks ago. Traders appear to be chasing the price higher in hopes of returning to the old highs.
Earnings Aug 21st.
Buy-Write Aug $24 call, currently $23.86-$1.70, stop loss $21.50
New Aggressive Recommendations
New Long Term Recommendations
Existing Play Recommendations
Links to original play recommendation
CLVS - Clovis Oncology (Aggressive Covered Call)
FB - Facebook (Long Term Short Put)
MOBI - Sky-Mobi Ltd (Covered Call)
KNDI - Kandi Technology (Covered Call)
NUS - NuSkin (Aggressive Short Put)
PRAN - Prana Biotech (Short Put - Update)
APC - Anadarko (Long Term Short Put)
GTAT - GT Advanced (Covered Call)
YNDX - Yandex (Covered Call)
ISIS - Isis Pharma (Covered Call)
ISIS - Isis Pharma (Long Term Covered Call)
ITMN - Intermune (Covered Call)
FEYE - FireEye (Short Put)
YELP - Yelp Inc (Short Put)
GBX - Greenbrier (Short Put)
CLVS - Clovis Oncology (Update Existing Position)
CLVS - Clovis Oncology (New Call/Put)
ARWR - Arrowhead Research (Covered Call)
GOGO - GOGO Inc (Covered Call)
AAL - American Airlines (Short Put)
ISIS - Isis Pharma (Covered July Call)
IOC - Interoil (Aggressive Covered Call)
TAN - Solar ETF (Long Term Covered Call)
FEYE - FireEye (Long Term Covered Call)
There are several different formulas for determining margin requirements for naked put writing. These are normally broker specific and some can require larger margin requirements than others.
Here is the most common margin calculation for naked puts.
100% of the option premium + ((20% of the Underlying Market Value) - (OTM Value))
For simplicity of calculation simply use 20% of the underlying stock price and you will always be safe. ($25 stock * 20% = $5 margin)
Prices Quoted in Newsletter
At Option Investor we have a long-standing policy prohibiting the editors and staff from actually trading the individual recommendations in order to conform to SEC rules concerning trades.
The prices quoted in the newsletter are the end of day prices in most cases.
When discussing fills or stops the prices quoted are the bid/ask at the time the entry trigger or exit stop is hit. This is NOT a price that someone on staff actually got using a live order.
For entry/exit points at the market open the prices quoted will be the opening print. The majority of the time the readers are able to get a better fill than the opening print because of market maker bias at the open.
For trades with an opening qualification the prices quoted will be the bid/ask at the time the qualification was met.
All of these rules normally produce worse prices than an active trader would normally get. Because they are standardized there may be some cases where a price quoted was better than an actual fill. If you received a price that was dramatically different than what was quoted please let us know.