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Free Earnings Trade of the Week: Red Hat, Inc. (RHT) – Reports After The Markets Close On Tuesday, 3/22/16

Red Hat, Inc. (RHT) is scheduled to report earnings after the markets close on Tuesday, 3/22/16.

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

Dec 18, 2015

83.01
83.99
80.45
81.40
7,692,400
81.40

Dec 17, 2015

78.81
79.34
77.66
78.86
2,688,600
78.86

(RHT) can be very unpredictable in terms of price movement post-earnings. A few keys to picking a strategy to use is the amount of movement allowed (up or down), strike price increments available, and the cost to place the trade. On this specific (RHT) trade, I think the Neutral Calendar Spread strategy is the right way to play this trade. The break-even points are very wide, and the price is very good. Even if the stock moves $5.00 + or more either way tomorrow, this trade will still do well and hold value even if it moves more than that, so I consider this trade very low risk with great potential. 9.5/10.

Note: I recommend placing this trade as soon as possible, as the value will most likely increase throughout the day. There is a possibility that the trade can be closed out for a profit by the end of the day if filled early. I will post that at the end of the trade details.

Here is how the trade is placed:

Entered Trade

Sell -25 RHT Apr16 75 Call

Buy 25 RHT May16 75 Call


Requirements

Cost/Proceeds
$1,875.00
Option Requirement
$0.00
Total Requirements
$1,875.00
Estimated Commission
$75.00

NBBO
0.40 – 1.10. Try to pay 0.75 or less for this trade. At a maximum, pay up to 0.85 if late.

If there is an opportunity to close out the trade early (taking less profit) if your order is filled at 0.80 or less, place the closing order out at 1.25 as a day order only.

I will post the price to close this order out tomorrow pre-market, right before the opening bell
RHT NCS 32216
See the attachment for the profit/loss chart.

Update 1: 9:25 am EST: Pre-market, the stock is down about $2.50/share, so using the Neutral Calendar Spread strategy looks very good here. I am placing the price to close the trade out at 1.90 for now. I will update any changes here, if needed.

Update 2: 1:05 pm EST. This trade is looking excellent right now. Time-decay and the current movement is going to increase value quickly. The price to close the trade out is still at $1.90.

Daily Options Trading Strategy (DOTS) Updated List – 3/11/16

Here is the current (4) tier list of the Daily Options Trading Strategy (DOTS), current as of 3/11/16:

Tier 1: AAPL, AMZN, BIDU, FB, GOOGL, LNKD, NFLX, PCLN, TSLA


Tier 2: BA, BABA, TWTR, FIT, UA, CRM, GPRO, C, FDX

Tier 3: BBY, EBAY, STZ, EXPE, CMG, AKAM, DIS, BWLD, PYPL

Tier 4: HD, IBM, MNST, ULTA, SQ, CAT, PX, GDDY, UPS

If you have any questions about the strategy or stock options in general, you can e-mail me anytime at kmob79@gmail.com

A Look Ahead To Earnings Next Week, 3/14/16 – 3/18/16

Next week provides plenty of opportunities with earnings trades. Among the companies reporting are the following stocks I will be looking to trade:

Monday: JMBA

Tuesday: PLCE, DSW, FDS, JASO, ORCL

Wednesday: ATU, CMCM, CLC, FDX, GES, JBL

Thursday: ADBE

Friday: TIF

Free Earnings Trade of the Week: Square, Inc. (SQ) – Earnings/Long-Term Trade – Expires June 2016

Square, Inc. (SQ) is scheduled to report earnings after the markets close on Wednesday, 3/9/16.

This trade is both an earnings and long-term trade combo. It expires in June 2016. I have been meaning to buy some (SQ) calls for a while, and with earnings due after the bell today, see an opportunity here. Even if the stock should drop post-earnings, the time-value of this trade will hold value in these calls. If the stock should make a significant move upward, this trade has the potential to turn out extremely well. 9/10.

Entered Trade

Buy 10 SQ Jun16 11 Call


Requirements

Cost/Proceeds
$1,650.00
Option Requirement
$0.00
Total Requirements
$1,650.00
Estimated Commission
$15.00

NBBO
1.35 – 2.00. Try to pay 1.65 or less for this trade. At a maximum, pay up to 1.80. I will post the STC tomorrow before the opening bell.

Update 1: 3:55 pm EST. I I am in this trade at 1.65. Already a nice gain, could sell. But with this amount of time left, June exp. will keep it.
Update 2: 9:25 am EST 3/10/16 : Pre-market, the stock is up about $0.20/share. The earnings report was good, and I see this stock continuing to rise. With a lot of time-value left on this trade, I am placing the STC at $4.00 on the calls, as I see the stock heading towards $15.00/share in the near-term future. I will be updating this trade periodically if there are any changes to the STC.
Update 3: 3:34 pm EST 3/10/16: STC still at $4.00. The stock dropped a little bit, nothing significant. Should make a move upward soon. I do not recommend selling anything short of $3.00 if you do not plan to get $4.00.

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