Johnson & Johnson (JNJ)

Update 10/18/2017: JNJ’s earnings came in at $1.90 per share, exceeding the consensus forecast of $1.82. The price rose by $5 in the post-earns session, breaking out of the $3 profit range and doubling the expected move and exceeding the maximum post-earns move of the past year.

Zacks suggested there would be an upside earnings surprise, None of the telltales I use pointed toward the magnitude of the move.

Shares rose by 3.7% over my two-day holding period, or a +672% annual rate. The options position produced a 38.6% loss for a -7,037% annual rate.

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JNJ publishes earnings on Tuesday before the opening bell.

I shall use options that trade for the last time 11 days hence, on Oct. 27.

Implied volatility stands at 16%, which is !0 times the VIX, a measure of the volatility of the S&P 500 index.

JNJ’s IV stands in the 53rd percentile of its annual range and the 43rd percentile of its most recent broad movement.

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Morgan Stanley (MS)

Update 10/17/2017: MS published earnings of $0.93 per share, beating the Street estimate by nine cents. The share price fell by nearly a dollar and then rose by about a dime, thereafter swinging into a very narrow sideways micro-trend.

I exited at 2% of maximum potential profit, well below my 25% target. I trade small positions, so the profit was barely enough to pay my trading fees. 

Shares showed a net rise of 71 cents from entry to exit, less than half of the expected move and within the central tendency of the last four post-earns moves.

Zacks gave MS a 0.25 score after running its earnings surprise predictor algorithm; the beta is 1.61

Shares rose by 1.5% during my one-day holding period, or a +530% annual rate. The options position produced a 2.0% return for a +740% annual rate.

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MS publishes earnings on Tuesday before the opening bell.

I shall use options that trade for the last time 11 days hence, on Oct. 27.

Implied volatility stands at 25%, which is 2.6 times the VIX, a measure of the volatility of the S&P 500 index.

MS’s IV stands in the 39th percentile of its annual range and the 76th percentile of its most recent broad movement.

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10/16 – 3:15 p.m. New York time

I entered two new positions, JNJ and MS.

I attempted to exit SCHW at under my target of 25% of maximum potential profit. The trend today has been ambiguous and it has been difficult to get a fill because of the wide bid/ask spread.

I knew it was wide when I went into the trade, and take this to be a lesson learned — the hard way. I shall attempt an exit on Tuesday. The options don’t expire until the end of the next week, so there is time.

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Two major housing reports will be issued: Housing starts, on Wednesday at 8:30 a.m. New York time and existing home sales on Friday at 10 a.m. Also, on Tuesday look for industrial production at 10 a.m.

Fed Chair Janet Yellen speaks twice during the week, on Sunday at 9 a.m. to the G30 International Banking Seminar and on Friday at 7:30 p.m. at the National Economists Club, both in Washington.

The Sunday speech will be on the Fed officials’ generic topic, The Economy and Monetary Policy. The Wednesday speech will be slightly more focused in its subject, Monetary Policy Since the Financial Crisis.

The speeches come in during the week in which the Federal Reserve issues its Beige Book describing business conditions in each Federal Reserve bank’s region. Out Wednesday at 2 p.m.

A housekeeping note: I’m discontinuing the Fedsters section, with speaking engagements by the Federal Reserve bank presidents. Speeches by the Federal Reserve chair and governors will be listed among the economic release lists.

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The Charles Schwab Corp. (SCHW)

Update 10/17/2017: SCHW’s earnings matched the consensus forecast, and prices fluctuated in a range that remained within the profit zone. I exited at 8.8% of maximum potential profit, below my target of 25%.

SCHW’s share price stayed within the zone of profit after earnings were published and came close to the central tendency of the last four post-earns movements. Zacks‘ earnings surprise predictor had given SCHW a 0.20 positive score.

Shares rose by 0.3% over my four-day holding period, or a +29% annual rate. The options position prouced a 9.6% return for a +879% annual rate.

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SCHW publishes earnings on Monday before the opening bell.

I shall use options that trade for the last time 14 days hence, on Oct. 27.

Implied volatility stands at 24%, which is 2.5 times the VIX, a measure of the volatility of the S&P 500 index.

SCHW’s IV stands in the 69th percentile of its annual range and the 28th percentile of its most recent broad movement.

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10/13 – 3:20 p.m. New York time

Two trades today: I entered SCHW and exited WFC.

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Wells Fargo & Co. (WFC)

Update 10/13/2017: WFC gapped to the downside after earnings were published. It broke past the breakeven point, and I exited for a a loss a week before the options expire, with shares down $1.86 from my entry point and the contracts costing $1.82 each to exit, or 56 cents net.debit.

The company showed a significant downside earnings surprise, report $0.84 per share compared to the consensus forecast of $1.05. The Zacks earnings surprise predictor had forecast a 0.20 upside earnings surprise.

The actual move at the time I exited was wider than the expected move and also larger than the maximum of the last four post-earnings trading days.

Shares declined by 3.4% over my one-day holding period, for a -1,231% annual rate. The options position produced a 30.8% loss for a -11,231% annual rate.

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WFC publishes earnings on Friday before the opening bell.

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

Implied volatility stands at 21%, which is 2.2 times the VIX, a measure of the volatility of the S&P 500 index.

WFC’s IV stands in the 41st percentile of its annual range and the 83rd percentile of its most recent broad movement.

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10/12 – 3:20 p.m. New York time

A new position on WFC is my sole trade today. I have a long-shot exit order in  on GLD and shall update after the close if it goes through.

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10/11/2017 – 3 p.m. New York time

I exited my position in FAST and entered no new positions.

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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.

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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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