10/26 – 3:20 p.m. New York time
In today’s outcomes, I entered positions on INTC and FXE. Also, I analyzed MSFT but declined the trade.
Author: Tim Bovee
MO Analysis
Altria Group Inc. (MO)
Update 10/30/2017: MO published earnings of $0.90 per share, slightly beating the Street estimate of $0.87. Shares were up by about half a dollar at the open and continued to rise throughout the today, and then declined in two subsequent trading days to near the pre-announcement level. I exited a 9.4% of maximum potential profit.
Zacks anticipated a -0.49 downside earnings surprise, the opposite of what actually occurred.
The movement by the end of the first post-earnings trading session was up by $2.00, slightly within the $2.25 maximum movement of the past year and far greater than the central tendency of $0.15.
Shares rose by 1.7% over my five-day holding period, for a +126% annual rate. The options position produced a +10.3% return for a +754% annual rate.
MO publishes earnings on Thursday before the opening bell.
I shall use options that trade for the last time nine days hence, on Nov. 3.
Implied volatility stands at 24%, which is double the VIX, a measure of the volatility of the S&P 500 index.
MO’s IV stands in the 56th percentile of its annual range and the 75th percentile of its most recent broad movement.
SPY Analysis
SPDR S&P 500 ETF (SPY)
Update 12/7/2017: I exited my SPY position preliminary to a roll forward into a new position. The options produced a net debit of $2.24, with shares at $264.28.
My reading of the chart, applying Elliott wave analysis, has persuaded me that SPY has taken a turn downward, marking the end of its long-running upward push beginning a major downtrend.
I shall use options that trade for the last time 51 days hence, on Dec. 15.
Implied volatility stands at 14%, which is 1.2 times the VIX, a measure of the volatility of the S&P 500 index.
SPY’s IV stands in the 30th percentile of its annual range and at the peak of its most recent broad movement.
Live: Wednesday, October 25, 2017
10/25 – 3:20 p.m. New York time
Here are today’s outcomes. I entered an earnings play on MO and exited an unsuccessful one on WHR. I also ended my bullish trend series on SPY, posting results, and replaced it with a new bearish trend series. See the old series analysis here, and the new series analysis here.
T Analysis
AT&T Inc. (T)
Update 10/30/2017: T’s earnings came in at $0.74 per share, slightly below analysts’ $0.76 consensus. Shares gapped to the downside by 60 cents and then swung into a sideways movement that has so far continued for three days. I exited for a loss.
Zacks anticipated the downside surprise but at a larger magnitude, the algorithm of its Earnings Surprise Predictor giving the event. a -0.96 score.
The first post-announcement session closed down $1.37 from the pre-earnings close, 43 cents less than the maximum move of $1.81 over the past year and well above the central tendency of $0.47.
Shares declined by 2.4% over my six-day holding period, or a -143% annual rate. The options position produced a -33.6% loss for a -2,041% annual rate.
T publishes earnings on Tuesday after the closing bell.
I shall use options that trade for the last time 10 days hence, on Nov. 3.
Implied volatility stands at 24%, which is 2.2 times the VIX, a measure of the volatility of the S&P 500 index.
T’s IV stands in the 92nd percentile of its annual range and the 88th percentile of its most recent broad movement.
NSC Analysis
Norfolk Southern Corp. (NSC)
NSC publishes earnings on Wednesesday before the opening bell.
I shall use options that trade for the last time 10 days hence, on Nov. 3.
Implied volatility stands at 26%, which is 2.7 times the VIX, a measure of the volatility of the S&P 500 index.
NSC’s IV stands in the 54th percentile of its annual range and the 84th percentile of its most recent broad movement.
Live: Tuesday, October 24, 2017
WHR Analysis
Whirlpool Corp. (WHR)
Update 10/15/2017: There were indications a downside earnings surprise was in the making, and WHR obliged, report $3.83 per share compared to the consensus estimate of $3.90. Shares declined by $19.25 the first trading day after publication.
For me it the outcome represented the chickens coming home to roost. I prefaced my decision to take the trade with this: “Despite the poor coverage…”. I bent my rules by entering a position whose zone of profit failed to cover both the expected move and the post-earns moves average, maximum and central tendency. The actual move exceed the maximum of the past four announcements by 88 cents.
My taking the trade points to an aspect of my psychology, and perhaps trader psychology in general, that I’ve noted over the years. If I put effort into analyzing a trade, I really want to make that trade, and I’m disappointed if I must pass on it. So the lesson for trading is, “Follow the numbers, not your heart.”
Shares declined by 11.24% over my two-day holding period, or a 2,052% annual rate. The options position produced a 40.6% loss for a 7,411% annual rate..
WHR publishes earnings on Monday after the closing bell.
I shall use options that trade for the last time 11 days hence, on Nov. 3.
Implied volatility stands at 32%, which is 3.1 times the VIX, a measure of the volatility of the S&P 500 index.
WHR’s IV stands in the 88th percentile of its annual range and the 96th percentile of its most recent broad movement.
GM Analysis
General Motors Co. (GM)
Update 10/24/2017: GM’s earnings came in at $1.32 per share, beating the Street consensus of $1.19. The share price rose by about $2 from the close in overnight trading and retraced about half of the rise by the opening bell.
Zacks had given GM an earnings surprise prediction score of 3.14. The $1.42 price movement during the life of my position exceeded both the average and the central tendency of the past four post-earns moves.
Shares rose by 3.1% over my one-day holding period, or a +1,144% annual rate. The options position produced a +96.2% return for a +35,096% annual rate.
GM publishes earnings on Tuesday before the opening bell.
I shall use options that trade for the last time 25 days hence, on Nov. 17.
Implied volatility stands at 25%, which is 2.4 times the VIX, a measure of the volatility of the S&P 500 index.
GM’s IV stands in the 52nd percentile of its annual range and the 82nd percentile of its most recent broad movement.
Tim Bovee, Private Trader 
You must be logged in to post a comment.