How I analyze trades

Tim Bovee1 Comment

Most of my trades coincide with publication of earnings, “earnings plays”, in the jargon of traders. I do so because those quarterly announcements are the only time I can guarantee heightened interest in stocks and their options, and therefore a likelihood that something will happen to provide me with an opportunity for profit. There is nothing worse than entering a position and seeing it immediately drift into the doldrums, where time passes and nothing happens.

Over years of trading I have settled on a few vehicles that best serve my needs.

When trading options, I use the short iron fly when I don’t know which way the price will move, or sometimes an iron condor if the options grid makes for a more balanced structure. When I expect the stock price to move in a direction, up or down, I use a short vertical position, a bull put spread for a rising price or a bear call spread for a falling one.

In analyzing potential positions I’m attempting to answer several questions.

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Live: Monday, November 27, 2017

Tim Bovee

11/27 – 2:45 p.m. New York time

Outcomes: No new positions and no exits.

11/27 – 2:25 p.m. New York time

I have posted an essay: How I analyze trades. It is a detailed description of the steps I go through to select my trades.

11/27 – 1:05 p.m. New York time

I’m using this slow day to play catch-up with the post-earnings moves analyses. I have updated CSCO and HD.

11/27 – 9:35 a.m. New York time

GSM, MTSC and TECD have seen no change in their Zacks metrics and do not meet my standards for trading as earnings plays. I have no analyses and perhaps trades on my agenda for today.

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The Week Ahead: New Fed chair hearing, old Fed chair testimony, GDP, trade and more

Tim Bovee

The Senate begins its nomination hearing for President Trump’s nominee to replace Janet Yellen as Federal Reserve chair, Fed Gov. Jerome Powell, The hearing will be held by the Committee on Banking, Housing and Urban Affairs, chaired by Sen. Michael Crapo, D-Idaho, on Tuesday at 9:45 a.m. New York time.

The outgoing Fed Chair Yellen delivers economic outlook testimony to the Joint Economic Committee of Congress on Wednesday at 10 a.m.

Five major reports will be published during the week: The second release of 3rd quarter gross domestic produce on Wednesday, international trade in goods on Tuesday and personal income and outlays on Thursday, each at 8:30 a.m., and new home sales on Monday and the Institute of Supply Management manufacturing index on Friday, each at 10 a.m.

One other potentially important Fed appearance during the week: The new Fed Vice Chairman for bank supervision addresses the Financial Stability and Fintech Conference on Thursday at 12:30 p.m. in Washington, D.C. His speech will be streamed live here.
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DE Analysis

Tim Bovee2 Comments

Deere & Co. (DE)

Update 11/22/2017: DE reported earnings of $1.57 per share, beating the consensus estimate of $1.43, with the stock opening $6.30 above the prior day’s close. I exited at 71.0% of maximum potential profit.

The Zacks algorithm anticipated a positive earnings surprise, with an earnings surprise predictor score of 1.32 in the context of a bullish (2) score.

Prior to the announcement the ADX marked an uptrend, at 36.96, with the +DI at 39.13 and the -DI at 12.79 for a ratio of 3.06.

DE closed the first trading session after earnings were published up $6.02 from the pre-earns closed, within the four-quarter maximum span of $10.16, the average of $6.54 and the central tendency of $7.45, irrespective of direction.

Shares rose by 3.1% ove rmy holding perio dof less than a day, or a +1,128% annual rate. Tye options position produced a +245.2% return for a +89,4845 annual rate.

DE publishes earnings on Wednesday before the opening bell.

I shall use options that trade for the last time 24 days hence, on Dec. 15.

Implied volatility stands at 30%, which is triple the VIX, a measure of the volatility of the S&P 500 index.

DE’s IV stands in the 64th percentile of its annual range and the 85th percentile of its most recent broad movement.

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CRM Analysis

Tim Bovee2 Comments

Salesforce.com inc. (CRM)

Update 11/22/2017: CRM reported earnings of $0.39 per share, beating the Street estimate by 2 cents. The price fell by $1.95 at the opening, well within the profit zone, I exited at 39.9% of maximum potential profit.

Zacks had anticipated a slight chance of an undershoot, giving CRM an earnings surprise predictor score of -0.37 in the context of neutral longer-term expectations for the stock.

Going into earnings CRM showed an upward trend, with the ADX at 52.93,  with the +DI at 32.2 and the -DI at 4.7 for a DI ratio of 6.85.

CRM closed the first trading session after earnings were published down $1.97 from the pre-earns close, a span well within the four-quarter maximum movement of $15.64, the average of $5.26 and the central tendency of $2.52, irrespective of direction.

Shares declined by 1.7% during my holding period of less than a day, or a +628% annual rate. The options position produced a 63.6% return for a +23,206% annual rate

CRM publishes earnings on Tuesday before the opening bell.

I shall use options that trade for the last time 10 days hence, on Dec. 1.

Implied volatility stands at 33%, which is 3.3 times the VIX, a measure of the volatility of the S&P 500 index.

CRM’s IV stands in the 64th percentile of its annual range and at the pak of its most recent broad movement.

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LOW Analysis

Tim Bovee1 Comment

Lowe’s Companies Inc. (LOW)

LOW publishes earnings on Tuesday before the opening bell.

I shall use options that trade for the last time 11 days hence, on Dec. 1.

Implied volatility stands at 27%, which is 2.5 times the VIX, a measure of the volatility of the S&P 500 index.

LOW’s IV stands in the 64th percentile of its annual range and the 76th percentile of its most recent broad movement.

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