A curious day for prospects. I have six symbols as potential earnings plays that meet my criteria for liquidity. Yet only one, GOOGL, has sufficiently high implied volatility to meet my standards.
I have remarked on occasion that the strength enjoyed by private traders is the ability to wait for high-quality trade, even if it means passing on a parade of mediocrities.
But how should quality be defined? I’m not overly rigid in the rules I use. I want for the underlying stocks to be trading a million shares a day or more.
And I want implied volatility to be in the upper half of a range, either the range for past 12 months, or for the range of the most recent broad movement. The latter is often a judgment call, but judgment in the face of ambiguity is the soul of trading.
Of the five symbols that don’t quite make the grade, three have IV so low that I doubt they will make the grade on Thursday: ABBV, CVK and HON.
Two are within a reasonable distance: INTC and SBUX.
I shall do a full analysis of GOOGL, and shall prep to do analyses of INTC and SBUX if their volatility moves favorably.
I shall also check ABBV, CVX and HON but won’t bother to prepare. I think the chances point toward them not being solid prospects worthy of further consideration.
By Tim Bovee, Portland, Oregon, Jan. 25, 2017