Live: Friday, Jan. 5, 2018

1/5 – 3 p.m. New York time

I entered two earnings plays using options, UNH and WFC. I also entered two earnings plays using shares,  BLK and FRC.

These trades allow a longer period before the actual announcement.

For the options if I can reach my exit goal, 50% of maximum potential profit, then I shall exit early, and if  the price near a profit zone boundary, then I shall attempt to roll the position forward.

For the shares, if the Fisher transform metric gives a bear signal then I shall exit, even if earnings have not yet been published.

I rejected MS as an options play without a full analysis because of low implied volatility relative to the annual range.

1/5 – 2:45 p.m. New York time

UNH analysis posted. That’s a wrap for today.

1/5 – 2 p.m. New York time

WFC analysis posted.

1/5 – 1:10 p.m. New York time

I have entered earnings plays using shares on BLK and FRC.

1/5 – 12:40 p.m. New York time

Today in exploring my idea about the benefits of entering some earnings plays early, I have analyzed 43 symbols and found seven worth analyzing for early entry.

Five are potential options positions:

sym date median action
WFC 20180112 am 20180111
CSX 20180116 am 20180112
MS 20180116 am 20180112
UNH 20180116 am 20180112
AA 20180117 pm 20180117

Two are potential shares positions:

sym date median action
BLK 20180112 am 20180111
FRC 20180116 am 20180112

I shall act on the shares trades today, and shall start working my way down the options list today, although, given the more extensive prep needed for options, I may not make it all the way down.

My screening method excluded cases where the earnings surprise and the Fisher transform metric didn’t match (one bullish, the other bearish), and then whether the Fisher transform signal was more recent and the metric allowed room for further movement before reaching an extreme.

1/5 – 4:50 a.m. New York time

I have no prospective earnings plays on my desk for Friday. I shall be looking for an opportunity to roll FXE forward to a new position within the series that has been underway since October.

I’m also going to look closely at whether my present practice, of entering earnings plays the last trading session before the announcement, is the best practice.

I’ve noticed that many stocks begin a pre-earnings rise a week before the announcement. Rather than betting on an outcome — a roll of the dice — would it be better to bet on a time-limited trend, where the end point (earnings day) is known?

The Fisher transform metric, discussed in Thursday’s Live post, appears to provide a useful tool for determining whether a pre-earns trend is underway, and I shall use it for that purpose.

By Tim Bovee, Portland, Oregon, Jan. 5, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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