PANW Analysis

Palo Alto Networks Inc. (PANW)

Update 9/1/2017: My passing on PANW proved to be right decision. The price opened up $12.12 after earnings were published. The opening price, $144.81, was below the upper break-even boundary, but the price rose above it in the second five-minute period after the opening bell and continued to rise. At no point did the position reach my exit point, which is 25% of maximum potential profit.

So, taking the opening price of the second 5-minute period, $143.80, as my theoretical exit, here are the stats:

At exit the price was up $10.55 above the price at analysis, slightly greater than the expected movement. The post-earnings move was much narrower than PANW’s has been in the past, at a ratio of 0.5 of both the average and central tendency after that last four announcements, and 0.2 of the maximum.

Earnings exceed the consensus estimate of $0.81 by 11 cents, coming in at $0.92. Zacks earnings surprise predictor had suggested a very slight chance of a negative earnings surprise, with a -0.06 score. That proved not to be the case.

All in all, I think the figures suggested that I made the right decision in not taking the trade. The beta was my primary reason for making that decision, and I shall continue to use that indicator as a guide, seeking out low beta high implied volatility trades.


PANW publishes earnings on Thursday after the closing bell.

I shall use options that trade for the last time eight days hence, on Sept. 8.

Implied volatility stands at 48%, which is 4.5 times the VIX, a measure of the volatility of the S&P 500 index.

PANW’s IV stands in the 84th percentile of both its annual range and its most recent broad movement.

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LULU Analysis

Lululemon Athletica Inc. (LULU)

Update 9/1/2017: LULU’s earnings bettered the consensus estimate of  $0.37 per share by two cents, coming in at $0.39 per share. I exited for a profit at 25.1% of maximum potential profit.

Shares rose by 6.5% over my one-day holding period, or a +2,370% annual rate. The options position produced a +33.5% return for a +12,224% annual rate.

The price was $61.22, up $3.65, at the opening bell after earnings were published. That is greater than the expected move of $5.23 but within the $7.23 beak-even width. I exited at $61.16 for a $4.21 debit. Analyst data had suggested a chance of a small earnings surprise, and so it proved to be.

The movement was a ratio of 0.4 of the average and central tendency movements of the last four earnings announcements, and 0.2 of the maximum. This is consistent with LULU’s low beta of 0.25.


LULU publishes earnings on Thursday after the closing bell.

I shall use options that trade for the last time eight days hence, on Sept. 8.

Implied volatility stands at 58%, which is 5.4 times the VIX, a measure of the volatility of the S&P 500 index.

LULU’s IV stands in the 97th percentile of its annual range and at the peak of its most recent broad movement.

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DG Analysis

Dollar General Corp. (DG)

Updated 8/31/2017: DG fell about $6.50 after earnings were published and then recovered about $2 in the ensuing three hours of trading. It came very close to meeting expectations of $1.09 per share, coming in with an eps of $1.08.

Shares showed a net declined of 3.8% over my one-day holding period, o a -1,368% annual rate. Tye options position produced a 33.4% yield on debit for a +12,202% annual rate.

The stock’s move of $2.85 was well below the expected $4.25, which puts it in the same group as 85% of earnings announcements, statistically speaking.

The move was also less than DG has showed historically after earnings, coming in at about half the average, a fifth of the maximum, and a bit less than three-fourths of the central tendency.

Zacks Investment Research listed DG with an earnings surprise predictor score of -0.37, suggesting that there would be a small negative surprise. The beta is 0.93.


DG publishes earnings on Thursday before the opening bell.

I shall use options that trade for the last time nine days hence, on Sept. 8.

Implied volatility stands at 36%, which is 3.2 times the VIX, a measure of the volatility of the S&P 500 index.

DG’s IV stands in the 80th percentile of its annual range and at the peak of its most recent broad movement.

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CTRP Analysis

Ctrip.com International Ltd. (CTRP)

Update 8/31/2017: CTRP’s stock price fell $3.70 after earnings were published, after earnings came it at double the consensus forecast.  I exited for a loss.

Shares declined by 7.0% over one day, or a -2,558% annual rate. The options position produced a -28.85 loss for a -10,442% annual rate.

The movement after publication was nearly double the average and central tendency of movements following the last four earnings announcements, and just a bit below the maximum.

The Street estimate for earnings was $0.08 per share, and the actual eps was $0.17. Zacks Investment Research going into earnings gave CTRP an earnings surprise predictor score of 11.11, signifying a major earnings surprise to the upside, which indeed is what happened. The beta was 1.71.

The post-earnings movement, at $3.70, far beyond the expected movement $2.51, placing it in a category that in theory covers the response to only 15% of earnings announcements.


CTRP publishes earnings on Wednesday after the closing bell.

I shall use options that trade for the last time nine days hence, on Sept. 8.

Implied volatility stands at 35%, which is 3.1 times the VIX, a measure of the volatility of the S&P 500 index.

CTRP’s IV stands in the 75th percentile of its annual range and the 86th percentile of its most recent broad movement.

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CIEN Analysis

Ciena Corp. (CIEN)

Update 8/31/2017: CIEN fell $2.52 at the market open after earnings were published. I exited for a loss.

Shares declined by 10.3% over one day, or a -3,754% annual rate. The options position produced a -24.6% loss for a -8,955% annual rate.

The price stayed within the average, maximum and central tendency ranges of the last four earnings announcements. CIEN’s earnings came in close to the mark. The consensus earnings estimate was $0.50 per share, and the actual eps was $0.51.

The actual movement exceeded the $1.99 expected by $0.53, making the response an outlier theoretically occurring after only 15% of earnings announcements..

The Zacks Investment Research earnings surprise predictor gave a -1.31 score prior to publication, forecasting a downside surprise. The beta going into earnings was 1.61.


CIEN publishes earnings on Thursday before the opening bell.

I shall use options that trade for the last time nine days hence, on Sept. 8.

Implied volatility stands at 48%, which is 4.2 times the VIX, a measure of the volatility of the S&P 500 index.

CIEN’s IV stands in the 70th percentile of its annual range and the 84th percentile of its most recent broad movement.

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The Week Ahead: GDP, jobs, manufacturing, global trade

A giant one-two punch marks the week.

The second gross domestic product estimate for the 2nd quarter will be released on Wednesday, and employment situation stats will be published Friday, each at 8:30 a.m. New York time.

Both are heavy hitters in discourse on our financial future, but it should be noted, both are trailing indicators, telling us what has happened rather than pointing toward what will. Traders who believe that past is prologue will give weight to the two macroeconomic pronouncements. Myself, I am no fan of the PIP theory, having broken my crystal ball in a tragic slip on the ice some years ago.

A leading indicator in the week’s econ mix is from the Institute of Supply Management manufacturing survey, out Friday at 10 a.m.

The employment numbers will get a sneak preview on Wednesday by means of a report produced by a private company, the ADP employment report. Look for it on Wednesday at 8:15 a.m.

Another major report out during the week: International trade in goods on Monday at 8:30 a.m.

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