10/27 – 3;15 p.m. New York time
Outcomes: I made no analyses, entered into no new positions and exited none.
Author: Tim Bovee
MSFT Analysis
Microsoft Corp. (MSFT)
MSFT publishes earnings on Thursday after the closing bell.
I shall use options that trade for the last time eight days hence, on Nov. 3.
Implied volatility stands at 23%, which is double the VIX, a measure of the volatility of the S&P 500 index.
MSFT’s IV stands in the 76th percentile of its annual range and the 88th percentile of its most recent broad movement.
INTC Analysis
Intel Corp. (INTC)
Update 10/30/2017: INTC announced earnings of $1.01 per share, coming in well above the consensus estimate of $0.82. The stock price gapped up nearly $2 at the opening bell. I exited for a loss.
Although Zacks was bullish on INTC, it gave only a 0.06 score in favor of an upside earnings surprise. The post-announcement $3.69 move by the end of first trading day had exceeded the $2.24 maximum of the past year by $1.45, in line with a trend from last summer of the market giving outsized reactions that have cut into my profits.
Shares rose by 8.2% over my four-day holding period, or a 750% annual rate. The options position produced a -49.4% loss for a -4,142% annual rate
INTC publishes earnings on Thursday after the closing bell.
I shall use options that trade for the last time eight days hence, on Nov. 3.
Implied volatility stands at 26%, which is 2.4 times the VIX, a measure of the volatility of the S&P 500 index.
INTC’s IV stands in the 94th percentile of its annual range and at the peak of its most recent broad movement.
FXE Analysis
CurrencyShares Euro ETF (FXE)
Update 1/11/2018: I exited FXE for a loss as the options composing the position approached their final day of trading, Jan. 19. I shall roll it forward quickly into a new bear position, although I may decide to alter the structure to an iron fly or iron condor to provide greater protection against reversals.
The options went for a $1.99 debit, producing a $0.54 loss. I shall defer calculation of results until completion of the series.
Update 11/7/2017: I have rolled FXE forward to another bear vertical position.
I used options that trade for the last time 73 days hence, on Jan. 19.
Implied volatility stands at 7%, which is 7/10ths of the VIX, a measure of the volatility of the S&P 500 index.
FXE’s IV stands in the 15th percentile of its annual range and the 22nd percentile of its most recent broad movement.
| Premium: | $0.45 | Expire OTM | |
| FXE-vertial | Strike | Odds | Delta |
| Calls | |||
| Long | 116.00 | 83.9% | 17 |
| Break-even | 113.45 | ||
| Short | 113.00 | 64.5% | 37 |
The premium is 15% of the width of the position’s wings.
The risk/reward ratio is 5.7:1.
The bid/ask spread is 2.2%.
I entered with shares at $111.91. The risk/reward ratio is high, but for a longer-term position buttressed by Elliott wave analysis, I’m willing to take that risk.
Update 11/6/2017: FXE fell steadily after I entered a bear vertical spread on Oct. 26 and exceeded my goal on Nov. 6. I rolled out at 52.4% of maximum potential profit.
The options went for a $0.20 debit with shares at $111.81.
I intend to roll the position forward on Nov. 7, and so will defer calculation of results until the roll series is complete.
FXE tracks the EUR/USD currency pair, which peaked on Sept. 8 and has since been working its way lower. My reading of the Elliott wave count suggests a continuing downtrend, and I shall enter a bear vertical options spread.
I shall use options that trade for the last time 50 days hence, on Dec. 15.
Implied volatility stands at 7%, which is 3/5ths of the VIX, a measure of the volatility of the S&P 500 index.
FXE’s IV stands in the 19th percentile of its annual range and the 11th percentile of its most recent broad movement.
Live: Thursday, October 26, 2017
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.
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