1/9 – 3:05 p.m. New York time
I entered one position today, an early earnings play on BMRC using shares.
JPM Analysis
JPMorgan Chase & Co. (JPM)
Update 1/16/2017; JPM published earnings of $1.07 per share, well below the $1.73 Street estimate. The earnings surprise came after a price rise pre-earnings had carried beyond the upper boundary of the position’s profit zone.
Shares rose by 4.4% over eight days, or a +199% annual rate. The options position produced a 51.1% loss for a -2,355% annual rate.
The decline after earnings were published was insufficient to produce a profit, at the time I exited. I decided to get out because the trend metric remained bullish, suggesting a further push into unprofitable territory.
The interesting aspect of this trade, from my standpoint, is the decision I mad eon Friday to carry the position past the earnings announcement. Like many of my recent trades, I entered JPM more than a week before earnings announcement in order to profit from the pre-earns price movement. The position remained unprofitable on Friday, Jan. 12, the last day to exit before earnings were published.
I made the decision to hold JPM past earnings a day earlier, writing in the Jan. 11 live feed: “It has fallen after each of the last four earnings announcements. The expectation of an upside earnings surprise is very slim. I shall hold this one through the announcement, despite an uptrending Fisher Transform.”
JPM after the announcement indeed behaved as I expected; just not enough. The question, then, is whether it’s better to hold through earnings or get out? The key, I think, is my use of the word “despite”, as in “despite an uptrending Fisher Transform”. If I have one of my major indicators counseling against continuing to hold, I should get out. Period. “Despite” is a word that I should strike from my lexicon in making these decisions.
So despite the loss, I learned something from this trade, and knowledge is always a profitable return.
I have entered a short iron condor spread on JPM, using options that trade for the last time 11 days hence, on Jan. 19. The premium is a $1.35 credit and the stock at the time of entry was priced at $108.36.
I made the decision to enter the trade in my account based on high implied volatility and reasonably close profit-zone coverage of the anticipated downside move.
The profit zone for this position is between $111.35 on the upside and $103.35 on the downside.
JPM publishes earnings on Jan. 12 before the opening bell.
Shares: PLXS
I have entered a long position on PLXS coinciding with the approach of an earnings announcement on Jan. 17 after the closing bell. Note that I’ve migrated away from the ADP/DI metrics to the Fisher Transform, which I discussed in the Jan. 4 Live feed.
The Fisher Transform metric showed PLXS moving into a downtrend, and I exited for a loss prior to the earnings announcement.
| sym | entry | exit | result ($) | result (%) | entry date | exit date |
| PLXS | 65.08 | 63.79 | -1.29 | -2.0 | 1/8 | 1/17 |
| zacks rank | zacks esp | FisherTrans | FT spread | earns est. | earns actual | |
| 3 | 0.83 | -0.059 | 0.624 | 0.81 | TBD |
By Tim Bovee, Portland, Oregon, Jan. 8, 2018
Live: Monday, Jan. 8, 2018
The Week Ahead: Prices and retail
Prices and inflation, or the lack of it, take center stage in the week’s economic reporting.
The consumer price index will be published on Friday at 8:30 a.m. New York time, simultaneously with retail sales. And the producer price index final demand stats will be released on Thursday at 8:30 a.m.
UNH Analysis
UnitedHealth Group Inc. (UNH)
Update 1/11/2018: UNH turned to a negative trend, signaled by the Fisher Transform metric, and I exited for a loss. The price peaked the day after I entered the position and stood slightly above the lower boundary of the zone of maximum profit at my exit.
Shares declined by 2.9% over five days, or a -130% annual rate. The options position produced a -10.7% loss for a -778% annual rate.
I have entered a short iron condor spread on UNH, using options that trade for the last time 14 days hence, on Jan. 19. The premium is a $2.60 credit and the stock at the time of entry was priced at $228.07.
I made the decision to enter the trade in my account based on the Fisher transform metric, the recentness of the Fisher signal and the presence of room for the price to move..
The profit zone for this position is between $237.60 on the upside and 215.10 on the downside.
UNH publishes earnings on Jan. 16 before the opening bell.
WFC Analysis
Wells Fargo & Co. (WFC)
I have entered a short iron condor spread on WFC, using options that trade for the last time 14 days hence, on Jan. 19. The premium is a $0.62 credit and the stock at the time of entry was priced at $62.31.
I made the decision to enter the trade in my account based on the Fisher transform metric, the recentness of the Fisher signal and the presence of room for the price to move.
The profit zone for this position is between $64.62 on the upside and $59.62 the downside.
WFC publishes earnings on Jan. 12 before the opening bell.
Shares: BLK and FRC
I have entered early earnings plays using shares on BLK and FRC. Both have recent bullish Fisher transform signals that have room for a further upward run. BLK has a very slight negative score on the Zacks earnings surprise predictor (ESP), and FRC has a significant bearish directional index spread (+DI, -DI).
In both cases I’m giving priority to the Fisher transform. BLK’s negative ESP is too small to matter, especially given the ESP’s poor showing in predicting negative surprises, and the Fisher transform is more responsive than the DI metrics and so, presumably, is the stronger measure.
I exited BLK before the earnings announcement and FRC afterward. Both were profitable, thanks to the pre-earns run-up in their prices.
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.
Live: Thursday, Jan. 4, 2018
1/4 – 3:25 p.m. New York time
The Fisher transform, discussed below, on SONC continues to be bearish, although the price itself isn’t yet showing an obvious decline. If the Zacks earnings surprise predictor were outsized, then I might consider it despite the Fisher reading, but it’s 1.85, which is fairly moderate. I’m passing on SONC as an earnings play using shares.
The outcome for today, then, is that I exited RPM and WBA.
Tim Bovee, Private Trader 
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