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Free Trade of the Week: Darden Restaurants, Inc. (DRI) – Earnings Trade- Reports before the markets open 12/19/13

Darden Restaurants, Inc. (DRI) – Earnings Trade- Before the markets open 12/19/13 DRI NCS 121913

Darden Restaurants, Inc. (DRI) is scheduled to report earnings before the markets open on Thursday, December 19, 2013.

Last quarter, the stock did very little at the open from the previous days close. It did drop a decent amount at one point, but nothing too significant. I am expecting the same this time. This stock has always had overpriced options before they report earnings trades, and a Neutral calendar Spread takes advantage of those. The Implied Volatility on the expiring December 2013 strike price (expires this Friday) is almost 3X that of the January 2014 strike price. Last quarter , the stock had the following price movement:

Sep 20, 2013 47.47 47.83 45.72 45.78 6,344,400 45.23
Sep 19, 2013 49.78 49.80 48.92 49.30 1,851,100 48.71

This trade is also extremely inexpensive to place. It should profit immediately. A solid 9/10 trade, with an excellent ROI %. Here is how the trade is placed:

Entered Trade

Sell -20 DRI Dec13 52.5 Call
Buy 20 DRI Jan14 52.5 Call

Requirements

Cost/Proceeds $500.00
Option Requirement $0.00
Total Requirements $500.00
Estimated Commission $60.00

Greeks / NBBO

Symbol Bid Ask IV Delta Gamma Vega Theta
DRI Dec13
52.5 Call 1.45 1.55 95.34 -1,035.95 -214.99 -31.00 740.22
DRI Jan14
52.5 Call 1.70 1.80 33.14 961.69 161.35 118.77 -66.88
Net -74.26 -53.64 87.77 673.34

NBBO 0.15 0.35. Try to pay 0.25 or less for this trade, and up to 0.30 to ensure you get in. See the attachment for the profit/loss chart.

Free EarningsTrade of the Week: Ciena Corporation – Reports 12/12/13

Ciena Corporation (CIEN) – Earnings Trade – Before the markets open 12/12/13
Ciena Corporation (CIEN) is scheduled to report earnings before the markets open on Thursday, December 12, 2013.

This stock has a history of making some big price moves after reporting. However, there have been other times where I’ve also seen it have very little movement, as the last two reports show:

Sep 4, 2013 22.35 23.66 21.97 23.54 18,296,200 23.54
Sep 3, 2013 20.31 20.92 20.28 20.68 7,795,900 20.68

Jun 6, 2013 18.45 19.19 18.17 19.15 24,069,600 19.15
Jun 5, 2013 16.45 16.60 16.21 16.31 5,574,000 16.31

A Strangle or Neutral Calendar Spread are risky to trade if only using one over the other. This earnings trade is a good candidate for a Double Neutral Calendar Spread/Strangle combination, where we can profit numerous ways. This is a solid trade and should do well. 8/10.

When placing this trade, always make sure that the Neutral Calendar Spread is filled before the Strangle. To clarify how to trade this, I will separate each strategy individually. Here is how it is placed:

Entered Trade #1: The Neutral Calendar Spread

Sell -10 CIEN Dec13 23 Call
Buy 10 CIEN Jan14 23 Call
NBBO 0.31 0.43. Try to pay 0.37 or less for this side of the trade, and up to 0.38.

Entered Trade #2: The Strangle

Buy 5 CIEN Jan14 25 Call
Buy 5 CIEN Jan14 21 Put
NBBO 1.76 1.83 , Try to pay 1.80 or less for this trade. With a Strangle strategy, a nickel or more to pay is no big deal, so if this price changes, pay more to make sure you get into the trade.
CIEN DNCSRIC121213

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