Month: October 2017

DAL Analysis

Tim Bovee2 Comments

Delta Air Lines Inc. (DAL)

Update 10/19/2017: DAL hit the consensus earnings forecast almost on the mark, coming in at $1.57 per share. The price closed the session immediately after earnings were announced up $0.37, within the central tendency and the average of the the past year’s post-earns moves.

I opted for a directional, bearish trade, which means the position lasted longer than with my direction-neutral plays. The price the next day out moved contrary to my position, rising about a dollar, and then began a four-day decline that brought the position near my profit goal. I exited a 49.1% of maximum potential profit.

Zacks had scored DAL as very bearish, with no earnings surprise expected. The surprise part turned out to be correct. And in Elliott wave terms the post-earns trend has been bearish, since the downward turn occurred below the prior peak of $55.75.

Shares declined by 3.3% over nine days, or a -135% annual rate. The options position produced a +97% return for a +3,916% annual rate.

DAL publishes earnings on Wednesday before the opening bell.

I  shall use options that trade for the last time 39 days hence, on Nov. 17. I’m going further out than is my usual practice on earnings plays because I have concluded that a bearish directional position best suits DAL’s prospects.

Implied volatility stands at 29%, which is 2.8 times the VIX, a measure of the volatility of the S&P 500 index.

DAL’s IV stands in the 32nd percentile of its annual range and the 71st percentile of its most recent broad movement.

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FAST Analysis

Tim Bovee2 Comments

Fastenal Co. (FAST)

Update 10/11/2017: FAST’s earnings came in at $0.50, slightly below the Street’s $0.52 consensus. The price gapped to the downside, and I exited for a small loss.

Although there is a chance that the price will reverse back to the upside, I have had very little good fortune when I hold to that expectation. That’s why I got out quickly.

Fundamentally, the iron fly strategy seems to work best when it’s treated as a roll of the dice: See the results, quickly take the winnings or losses, and move on.

Shares declined by 4.4% during my holding period, or a -1,619% annual rate. The options position produced a 8.2% loss for a -2,980% annual rate.

The $2.45 share price move was $0.31 greater than the expected move  yet below the average and central tendency moves of the past year.No earnings surprise was expected, contrary to the downside surprise that actually occurred.

FAST publishes earnings on Wednesday before the opening bell.

I shall use options that trade for the last time 11 days hence, on Oct. 20.

Implied volatility stands at 32%, which is 3.1 times the VIX, a measure of the volatility of the S&P 500 index.

FAST’s IV stands in the 87th percentile of its annual range and at the peak of its most recent broad movement.

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GLD Analysis

Tim Bovee3 Comments

SPDR Gold Shares (GLD)

GLD by my count using Elliott wave analysis has began an upward push in a countertrend correction. A sharp rise on Friday, continued with an upward gap today, seems to confirm my assessment.

I shall use options that trade for the last time 39 days hence, on Nov. 17.

Implied volatility stands at 11%, which is 1.2 times the VIX, a measure of the volatility of the S&P 500 index.

GLD’s IV stands in the 13th percentile of its annual range and the 3rd percentile of its most recent broad movement.

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The Week Ahead: A semi-holiday, prices, retail, Yellen

Tim Bovee

Monday is a federal holiday, Columbus Day, in the United States, but not a stock market holiday. Although the federal government, banks and the bond market will be closed, the stock exchanges and equity futures markets will be open for business as usual.

Two price reports lead the week in economics data, the consumer price index on Friday and the producer price index final demand index on Thursday, each at 8:30 a.m. New York time.

The retail sales report will be published on Friday, also at 8:30 a.m.

The Federal Open Market Committee minutes of the meeting on Sept. 19-20 will be made public on Wednesday at 2 p.m. At that meeting the committee voted unanimously to keep the federal funds rate unchanged, at 1% to 1.25%, and to begin unwinding its holdings obtained to stave off economic collapse during the Great Recession of 2007-2008, a process none as “balance sheet normalization”.

Fed Chair Janet Yellen speaks on Sunday, Oct. 15, at 9 a.m. to the G30 International Banking Seminar in Washington.

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COST Analysis

Tim Bovee2 Comments

Costco Wholesale Corp. (COST)

Update Oct. 9, 2017: COST’s earnings beat the Street estimate of $2.04, coming in at $2.08. in the first day of trading after the announcement COST shares declined by $10.07, far greater than the maximum change of the last four earnings releases and about double the 85% confidence expectation. The move was an outlier, and it resulted in a loss for my position.

Zacks Investment Research‘s earnings surprise predictor had a 0.51% chance of a downside surprise prior to the announcement, suggesting that the positive surprise that actually occurred would have a positive impact on prices. The beta, 1.07, did not suggest an outsize move.

The loss at the market open after the announcement was $8.07, so the best strategy would have been to get out immediately. Holding on in the hope of a bounce cost an extra 50% in stock price decline. It would have been better to have exited at the post-announcement opening bell.

Shares declined by 7.4% over my four day holding period, or a -671% annual rate. The options position produced a 41.8% loss for a -4,383% annual rate.

COST publishes earnings on Thursday after the closing bell.

I shall use options that trade for the last time eight days hence, on Oct. 13.

Implied volatility stands at 22%, which is 2.3 times the VIX, a measure of the volatility of the S&P 500 index.

COST’s IV stands in the 92nd percentile of its annual range and the 83rd percentile of its most recent broad movement.

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