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Free Earnings Trade of the Week: Diamond Foods (DMND) – Reports Earnings After the Markets Close 9/29/15

Diamond Foods (DMND) – Earnings Trade – After the markets close 9/29/15

Diamond Foods, Inc. (DMND) is scheduled to report earnings after the markets close on Tuesday, September 29/ 2015.

Last quarter, the stock had the following price movement after reporting earnings:

Jun 5, 2015 31.00 31.50 30.28 31.11 1,593,600 31.11
Jun 4, 2015 29.00 29.40 28.71 28.97 335,000 28.97

Seeing how it moved last quarter (and this is typical of the stock after earnings), I am going to use a Neutral Calendar Spread. If there is one complaint, it is that there are no weekly options available. This does not mean it is not a good trade, but can take a couple of days longer to close it out. The cost of this trade is very fair, so it should at least net a double up. I am giving this trade an 8/10.

Here is how the trade is placed:

Entered Trade

Sell -25 DMND Oct15 32 Call
Buy 25 DMND Nov15 32 Call


Cost/Proceeds $1,250.00
Option Requirement $0.00
Total Requirements $1,250.00
Estimated Commission $75.00

Greeks / NBBO

Symbol Bid Ask IV Delta Gamma Vega Theta
DMND Oct15
32 Call 1.55 1.70 59.42 -1,307.92 -242.93 -68.68 121.06
DMND Nov15
32 Call 1.95 2.30 44.65 1,325.85 184.93 119.78 -52.43
Net 17.93 -58.00 51.10 68.63

NBBO 0.25 0.75. Try to pay 0.50 or less for this trade. At a maximum, pay up to 0.55. See the attachment for the profit/loss chart.

DMND NCS 92915

I will post the price to close out the trade tomorrow morning before the markets open.

Update 1: Pre-market, the stock isn’t moving too much, down around $0.60/share. I am placing a close order at 1.20. I will update any changes here as needed.

Update 2:  Close order now at $1.10

Update 3: Close order still at $1.10. This trade is looking very good, hovering right near the strike price. If there were weekly options available, this trade would have been closed immediately. Will continue to keep gaining early next week. Plan to close it out on Monday or Tuesday.

Great Start to the Trading Week. Costco (COST) Earnings Due Tomorrow After the Markets Close

3 quick, early in and out trades this morning using the Daily Options Trading Strategy. See http://kevinmobrien.com/wp-admin/post.php?post=480&action=edit  AAPL, AMZN, and FB. All call trades so far. Costco (COST) earnings trade (reports tomorrow before the opening bell) was just posted on the Trading Forum http://kevinmobrien.com/wp-admin/post.php?post=127&action=edit

Update: (COST) – I had conflicting reports as to when the stock is scheduled to report earnings. I am now going to assume it is after the markets close tomorrow. I will still be using the same strike prices.

Earnings Trade Possibilities Next Week – 9/28/15 – 10/2/15

Here are the stocks I will be looking at next week for earnings trades:

Monday: Vail Resorts (MTN) – before the markets open

Tuesday: Costco (COST) – before the markets open, Diamond Foods (DMND) – after the markets close

Wednesday: Paychex (PAYX) – before the markets open

Thursday – McCormick & Company (MKC) – before the markets open, Micron Technology-(MU) – after the markets close, Progressive Software – PRGS – after the markets close


Excellent Week of Trading So Far (9/21/15 – 9/25/15

This week has been very good, with lots of daily trades (which you can see here: http://kevinmobrien.com/wp-admin/post.php?post=480&action=edit

There have also been two very good earnings trades so far, with Red Hat (RHT) and Accenture (ACN) both looking to be at least double-ups.

My weekly Reverse Iron Condor trades, on Citigroup (C) and (GLD) have already been closed out, great trades at a minimal cost. I have posted next weeks Reverse Iron Condor on (C) for next week.

With the current market volatility, my Daily Options Trading Strategy (DOTS) is seeing even more of an uptick in the number of trades placed daily.  I expect this trend to continue. Even in low volatility markets, the strategy holds up regardless. It really is immune to any market conditions. Earnings trades will also be picking up soon.

If you have nay questions on these trades, send me an e-mail or leave a comment. Thanks.

Free Earnings Trade of the Week: Accenture plc (ACN) – Earnings Trade – Before the markets open 9/24/15

Accenture plc (ACN) is scheduled to report earnings before the markets open on Thursday, September 24, 2015.

Last quarter, the stock had the following price movement after reporting earnings:

Jun 25, 2015 100.21 100.47 99.16 99.48 5,103,200 99.48
Jun 24, 2015 98.01 98.40 96.79 97.77 2,525,800 97.77

The current Implied Volatility (IV) on the weekly at-the-money strike price is over double that of the October strike price. (ACN) has never been all that volatile after reporting earnings, and on this trade I am going to take advantage of that by using a Neutral Calendar Spread.

Having weekly options available for this strategy is always beneficial, as the value of the trade post-earnings moves up a lot faster when the anticipated price move happens. This is because of time-decay and the loss o value on the weekly option (the sell side). The trade is priced great here. I am giving this trade a solid 9/10.

Here is how the trade is placed (Note: this is the amount of contracts I am using personally):

Entered Trade

Sell -25 ACN SepWk4 97.5 Call
Buy 25 ACN Oct15 97.5 Call


Cost/Proceeds $1,575.00
Option Requirement $0.00
Total Requirements $1,575.00
Estimated Commission $75.00

Greeks / NBBO

Symbol Bid Ask IV Delta Gamma Vega Theta
ACN SepWk4
97.5 Call 1.80 2.00 67.14 -1,259.44 -205.99 -71.92 1,210.38
ACN Oct15
97.5 Call 2.45 2.60 31.12 1,152.22 131.82 240.19 -165.34
Net -107.22 -74.17 168.27 1,045.04

NBBO 0.45 0.80. Try to pay 0.63 or less for this trade. At a maximum, pay up to 0.66.  See the attachment below for the profit/loss chart.




ACN NCS 92415

Update 1: Pre-market, the stock is down $2.85/share. I am placing the close order (net credit) at $1.20.  I will update any changes here if needed.

Weekly Trades and Strategies That Require Less Time Management – 9/17/15

For traders that are busy and do not have time to trade daily, I also have weekly trades such as the Reverse Iron Condor and Neutral Calendar Spreads. These  trades are very easy to manage and do not require constant monitoring. I post these trades usually on Thursday mornings before noon EST in the Trading Forum at http://kevinmobrien.com/forum/index.php. The Reverse Iron Condors have an expiration the following Friday using weekly options. For example, today I placed a Reverse Iron Condor on Citigroup (C) and the SPDR Gold Shares (GLD), and they expire on 9/25/15. Usually, they take about 3 trading days to close the position, sometimes a day sooner or later. I post updates on the sell-to-close orders as the positions begin to move. These trades are very inexpensive to place, and consistently provide a great source of profits on a yearly basis. I have many articles on Seeking Alpha on these strategies if you would like to learn more about them.

Other weekly Reverse Iron Condor candidates are iShares Silver Trust (SLV) and the (VXX).

If you have a busy schedule, definitely check these strategies out.

Free Earnings Trade of the Week: Oracle Corporation (ORCL) – Earnings Trade – After the markets close, 9/16/15

Oracle Corporation (ORCL) – Earnings Trade – After the markets close 9/16/15

Oracle Corporation (ORCL) is scheduled to report earnings after the markets close on Wednesday, 9/16/15.

Last quarter, the stock had the following price movement:

Jun 18, 2015 41.91 42.98 40.97 42.74 79,138,400 42.58
Jun 17, 2015 44.86 45.24 44.37 44.91 27,080,800 44.74

This quarter, I am expecting the stock to move around $3.00 a share, up or down. The strategy I will be using here is the Double Neutral Calendar Spread. I will copy and paste the explanation of the strategy I will be using below. For more information on this strategy, see my post from last week at http://kevinmobrien.com/?p=858

“For a few years, I have been using a Double Neutral Calendar Spread combination, meaning I am buying two (2) NCS that are both out-of-the-money, but have the same expiration, using a call side and a put side. This strategy is great when there is an opportunity to trade it, but there aren’t that many of these.

The premise of this strategy is to synthetically have a Strangle position at a fraction of the cost. Since Neutral Calendar Spreads are very inexpensive debit spreads to place, this strategy uses two of them in anticipation that the stock will make a large price move after reporting, but without putting a lot of capital to trade it. In fact, this strategy is about 1/5 the price of what a Strangle/Straddle would cost.

Let’s assume ORCL makes about a $3.00 – $4.00 move up tomorrow. Since I am using OTM calls and puts, the call side strikes would be right where the share price is, a perfect scenario. On the flip side, if the stock moved down the same amount, the puts would be the very profitable side. Since this trade is very inexpensive to place, the ROI would far exceed the price paid combined for the two trades. This is what I see happening tomorrow.

The most important thing to remember here is that if one side of the trade is filled, the other side must be filled, as well. One is contingent on the other being filled. So, if you get one side filled, but the other somehow does not (not likely), then you must close out the side that was filled, as it would no longer be a “neutral” trade, so to speak.
. 9/10.

Here is how the trade is placed:

Combined Order (4 “legs”)

Sell -25 ORCL Sep15 41 Call
Buy 25 ORCL Oct15 41 Call
Sell -25 ORCL Sep15 35 Put
Buy 25 ORCL Oct15 35 Put


Cost/Proceeds $1,200.00
Option Requirement $0.00
Total Requirements $1,200.00
Estimated Commission $150.00

NBBO 0.44 0.51. Try to pay 0.48 or less for this trade. At a maximum, pay up to 0.50. I will post the STC orders for both sides of this trade tomorrow morning before the markets open.

The Profit/Loss chart and Break-Even Points:


Update: 9/17/15: Pre-Market, the stock is down $1.50/share. On the Put Side of this trade, place the close order at $0.90. On the Call Side, place the close order at $0.30. The stock may reverse later in the day, so would like to get some value on the call side. I will update any changes to these orders here.

Update #2: Place the close order on the put side at 0.75. On the call side, place the close order at 0.15.

Update 3: Place the close order on the put side at 0.75 and the call side at 0.05.

Update $; Place the close order on the put side at 0.65.

Earnings Strategy: The Strangle

The Strangle is a strategy that, when used properly, can bring very high returns. Similar to the Straddle, the Strangle is when a trader buys both out-of-the-money call and put options, anticipating a large price move after the company reports earnings. It is a neutral-based strategy, meaning that it doesn’t matter which way the stock moves, as long as it does move. Profit potential is unlimited on the upside and at full profit if the stock hits rock bottom on the put side. The strategy is a debit spread. I prefer to only use this strategy on stocks that historically and consistently make very large price moves after reporting earnings.

While the returns can be very high, this is a strategy that is not very cheap to place, although lower than the Straddle. There are numerous factors that are keys to success using this strategy:

  • The stocks volatility after reporting earnings (Historical and Implied Volatility)
  • The price paid to place the trade
  • The Strike Prices used and Strike Price Increments
  • Time-Decay and Time-Value
  • Liquidity
  • Lower Share Priced Stocks
  • Time of Placement

Deciding which stocks are good candidates for a Strangle can be difficult sometimes. Just because a stock moved 15% last quarter after reporting earnings doesn’t mean the same will happen the next time, and vice versa. This is why I only recommend using this strategy only with stocks you follow daily and understand how they move both pre-earnings and post-earnings. My advice to new traders to this strategy is to look at a minimum of the last four quarters to see how the stock has moved in terms of percentage post-earnings.

The Strangle is not a strategy to use with stocks that historically move little post-earnings. An example of this would be a stock like AT&T (T). You don’t want to use a Strangle on a stock that might move only $1.00 a share after reporting earnings. You will have no chance to make any money. On the other hand, stocks like TSLA, GOOGL, SNDK, YELP, and pharmaceutical companies are good candidates (I will use this strategy on pharmaceutical companies when the FDA ishttp://kevinmobrien.com/wp-admin/post-new.php set to make a decision on drug approval/denial). BETA can also be a good gauge on how a stock may move. Even with this information, repetition and practice will be your best way to learn this strategy and when to pick your spots.

The price paid to place this trade is critical to the Strangle strategy. Often, some trades are just too expensive. This is due usually to the rise in Implied Volatility and expected price movement. Some time ago, there was an author on Seeking Alpha who recommended a Strangle on Priceline (PCLN). I knew ahead of time this was going to be a disaster of a trade. First, the options were simply too expensive. Even on a Strangle, which cost less than the Straddle, this trade was going for over $35.00 a contract on each side of the trade, the calls and puts. To add to the disaster, the author was using expiration dates that expired that same week. To explain this, if the stock didn’t move about $80.00/share, it was a loser. What I though might happen did, PCLN moved minimally. Those calls and puts both got crushed. A huge loss, but even more so because there was no time left at all for it to even move towards one of the strikes. So how does one tell if an option is overpriced? Implied Volatility (IV) is a good start, but hardly all that matters. Current market conditions, the 52-week range of the stock, historical volatility, all play a role, as does time-value.

Let’s say I wanted to use a Strangle on TSLA, with October expirations and buying $260.00 calls and $245.00 puts. The trade is going for (hypothetically) $30.00 ($15.00 for each “leg”) combined to place. This would immediately give me some hesitation, even with the time-value factor on my side. The reason is the IV crush would still severely drop the value of both the calls and puts. It would take a fairly massive move after earnings to just break-even. While this is definitely possible with a stock such as TSLA, if I am paying that much to place the trade, I better be very sure it will move like that. Anything less and the trade will lose a lot of value. However, if I saw that the trade was going for $20.00 – $22.00 to place, I would be more inclined to buy a Strangle. Understanding these subtle differences will come with experience.

The strike prices chosen is very important when placing a Strangle. You do not want to use too far out-of-the-money calls and puts. The stock could make a large price move after reporting, but if you used strikes way out there it is basically buying a lottery ticket. While the cost of the trade can be substantially reduced by doing this, it also makes it more difficult to profit, as the deltas are much lower. Market makers understand this, as well. The strike prices used also must be realistic compared to what the share price currently is and what the reasonable, expected movement might be after reporting earnings. On a stock such as GOOGL, for example, if the share price is at $650.00/share currently, I do not want to be using $800.00 calls and $500.00 puts. That is much too wide apart. A more realistic Strangle would be $700.00 calls and $600.00 puts, with longer expirations, which I will go into.

Strike price increments available is something to pay very close attention to. On higher-priced stocks like GOOGL, PCLN, etc., the strike prices are in $5.00 increments. As an example, October (calls) $650.00, $655.00, $660.00/ (puts) $645.00, $640.00, $635.00. This is not such a big issue with these higher-priced stocks, but with lower-priced stocks this is a major problem. There are times where I really like the price of a specific trade, but the strike price increments available make it impossible to trade. A stock such as Boeing (BA), at $135.00/share currently, only has strike price increments of $5.00 if using month out options. Knowing how BA tends to move after reporting earnings historically, I would never use a Strangle on BA with only those strike prices, It would take too much of a move up or down to break-even, let alone profit.

Time-Decay is one aspect of this strategy that I really stress option traders to learn. Time-Value is even more important. I would never recommend for any trader to use weekly options or soon-to-be expiring options. The reason for this is the time-decay factor. After earnings are announced, the Implied Volatility drop will always be significant. This is why you will sometimes see a stock move exactly as you hoped for post-earnings release, but the option value remains stagnant or loses value. I get asked this question all the time. Often, it was because the trader used weekly options. This is even more pronounced with the Strangle, as you are initially buying out-of-the-money options. The Straddle will have a higher delta as it is more deep-in-the-money (as compared to the Strangle). My advice: never use weekly or short-term expiring options when placing a Strangle. I recommend at least three (3) weeks of time-value. This also protects you in case the stock initially does not make the required move. If you have weekly options, you aren’t even giving the stock a chance to do so. While you will pay more for the added time-value, it is well worth it. The cost is higher, but it is a nice safety net, and the longer-term options will hold their value much better.

Always pay attention to liquidity when placing a Strangle, both the open interest, daily, and the stock itself. A great example of this is a stock like Autozone (AZO) and  Intuitive Surgical (ISRG). What happens here is that the bid/ask prices are so wide on the options post earnings that even if the stock required the necessary price move to profit, you may not make what you thought you would. Often, you will not get your sell-to-close order filled at the mid-point of the bid/ask, which should be the reasonable price to close out the profitable side. Depending on the liquidity, there just may not be enough buyers willing to pay that., so the trade could sit in the queue for hours, if not days to get your desired price. I’ve seen this happen all too often. The last thing you want to see if a great trade go bad and the stock reverse itself. That’s not fun to watch.

With stocks that have a lower share price, you really have to be careful using a Strangle strategy. This is because the stock will not move as much incrementally as a stock that is higher priced, and the strike prices available may hinder any profitability. For example, if a stock is currently $20.00/share, but there are only $2.50 strike price increments available, it makes it very difficult to profit. There are exceptions to this rule, but generally, try to use stocks that are at least $50.00 a share or higher. I recommend completely staying away from stocks that are under $15.00/share.

The Strangle is very reliant on where the current share price is and when you place the trade. The goal here is to use strike price increments that are as close to neutral as possible. Placing a Strangle too early can have serious consequences. As an example, let’s say I bought a Strangle on XYZ stock at the market open when it was $100.00/share.The company is expected to announce earnings after the bell that same day. Since everyone knows this, the volume will be higher and the share price will fluctuate. By 2:00 p.m. EST that same day, the share price is now $105.00. Well, now my Strangle trade is no longer neutral-based at all. It is completely bullish to the call side. If the call side is up (which it would be under this circumstance), the put side will be down a lot, as well. Yes, you could ride it out and keep both sides, but defeats the purpose of the strategy to begin with. There is just a likelihood that the stock moves back down after-hours and into the next day that you are stuck right in the middle, which is the worst possible scenario when using a Strangle.

What I like to do is this: if  a company is reporting earnings before the markets open the following day, I will place the Strangle anywhere from 2:00 pm EST- to 3:00 pm EST the day before. This allows me to have a good idea where the share price will close at and what strike prices to use to be as neutral as possible. You do not want uneven strike prices. It doesn’t have to be aligned perfectly, but as even as possible.

To summarize, while the Strangle strategy can be used to great effect, a trader must be very careful when using it. It is one of the more expensive earnings trades  and while it can provide great returns when right, the losses can be very large if the stock does not move as necessary. It is a strategy that becomes more easy to understand and use properly with experience. Make sure to only use this strategy with stocks you are familiar with, and pay extra for the added time-value.

If you have any questions, please leave a comment or e-mail me at kmob79@gmail.com. Thanks.














Daily Options Trading Strategy (DOTS) – Updated List – 9/10/15 – Added Tier 4

I have added a fourth tier to the Daily Options Trading Strategy (DOTS). Stocks like BWLD and ULTA are very volatile stocks, just make sure that the bid/ask prices on the options are fair before placing a trade.





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