I have four potential earnings plays on my desk for Monday: BABA, DD, LMT and VZ. However, my short list is LMT and VZ. That requires some explanation.
I am using the MAR series of options, expiring March 17, as my primary vehicle for trades. Under the grid system used by the Chicago Board Options Exchange, many symbols aren’t represented by options in all months.
BABA and DD both lack MAR-series options. My alternatives are:
- The APR-series options, which lengthens the lifespan of the trade to 88 days and therefore means it will tie up trading funds for longer.
- The FEB-series options, which shortens the lifespan to 25 days, lowering the premium and therefore potential profit.
The pace of earnings announcements has reached a point where I will need to choose among possibilities in order to stay liquid enough to trade the best.
And frankly, one strength that we have as private traders is that we don’t have to compromise on the quality of our trades. We have agency and choice, and no boss or client breathing down our necks ordering that we act because it it looks good.
So I choose to focus my trading on the symbols with MAR-series options, foregoing the rest unless their is a truly compelling reason to compromise on quality.
I shall analyze LMT and VZ on Monday with an eye toward constructing trades
By Tim Bovee, Portland, Oregon, Jan. 20, 2017