Red Hat Inc. (RHT)

Update 12/20/2017: RHAT came in 1.46% below analysts’ earnings estimate, reporting $0.73 against a consensus of $0.74. After the announcement, shares fell $1.35 from the close in the first half hour of after-hours trading, then recovered $5.14 of the fall before the opening bell. The first 7-1/2 hours after the bell saw a fall of $5.11. I exited early at 21.8% of maximum potential profit.

Shares declined by 3.4% over my holding period of less than a day, or a -1,223% annual rate. The options position produced a +27.9% return for a +10,177% annual rate.

I went into the trade with Zacks showing a bullish rank (2) with the earnings surprise predictor at a -0.10% score, suggesting a small chance of a negative surprise. The trend metrics showed little or no trend but with an upward bias. The average directional index (ADX) stood at 24.35 going into the trade, the positive direction index (+DI) at 27.74 and the negative (-DI) at 21.26.

Those Zacks and trend metrics were all in line with what actually occurred with earnings, but not the post-announcement price movements.

The estimated move, based on options pricing, was $7.69. The actual movement from the pre-announcement close to the post-announcement low was a decline of $8.85, which moved beyond the $7.57 downside profit zone.

The movement form the pre-earns close to the close on the first trading day after the announcement was -$6.86, within the average and maximum of the four prior earnings announcements, but a bit larger than the central tendency.

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RHT publishes earnings on Tuesday after the closing bell.

I shall use options that trade for the last time 10 days hence, on Dec. 29.

Implied volatility stands at 38%, which is 3.8 times the VIX, a measure of the volatility of the S&P 500 index.

RHT’s IV stands in the 80th percentile of its annual range and the 82nd percentile of its most recent broad movement.

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Micron Technology Inc. (MU)

Update 12/20/2017: MU beat the Street’s earnings estimate by 8.5%, coming in at $2.45 after estimates of $2.26. Shares rose by $3.24 in overnight trading, then fell $1.78 in the first 80 minutes after the opening bell. I exited early for 15.0% of maximum potential profit.

Shares rose by 5.5% over the holding period of less than a day, or a +1,993% annual rate. The options position produced an 18.9% return for a +6,909% annual rate.

I entered the trades with Zacks report a bullish rank (2) with an earnings surprise predictor score of 0.23%, anticipating a small chance of a positive earnings surprise. Both metrics successfully indicated a bullish bias but failed to anticipate the magnitude of the surprise. 

The average direction index stood at 23.35, with the positive directional index (+DI) at 26.03 and the negative (-DI) at 24.49, together indicating a weak upward or sideways trend. The metrics suggest the market failed to anticipate MU’s actual performance.

The estimated price move, based on options pricing, was $3.38. The actual move reached a high of $2.82 above the pre-earns close, staying within the $3.33 upside profit zone.

The price rose $1.77 pre-earns close to the close of the first trading session after earnings, below the $2.27 average, $2.92 maximum and $2.29 central tendency of the four prior earnings announcements.

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MU publishes earnings on Tuesday after the closing bell.

I shall use options that trade for the last time 10 days hence, on Dec. 29.

Implied volatility stands at 54%, which is 5.4 times the VIX, a measure of the volatility of the S&P 500 index.

MU’s IV stands in the 41st percentile of its annual range — a result of a spike last June — and the 81st percentile of its most recent broad movement.

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BlackBerry Ltd. (BB)

BB publishes earnings on Wednesday before the opening bell.

I shall use options that trade for the last time 10 days hence, on Dec. 29.

Implied volatility stands at 55%, which is 5.5 times the VIX, a measure of the volatility of the S&P 500 index.

BB’s IV stands in the 73rd percentile of its annual range and the 88th percentile of its most recent broad movement.

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12/19 – 3:15 p.m. New York time

In today’s outcomes, I placed three trades today, all of them earnings plays, on MU and RHT using options and on WGO using shares. I exited no positions.

I analyzed BB but rejected the trade.

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12/18 – 2;55 p.m. New York time

No outcomes today. I entered no new positions, nor did I exit positions.

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Three real-estate reports will be published during the week, the forward-looking housing starts on Tuesday at 8:30 a.m. New York time and a pair of sales reports, existing home sales, which covers the greater part of the market, on Wednesday and new home sales on Friday, each at 10 a.m.

Also out, the third and final estimate of 3rd quarter gross domestic product on Thursday and durable goods orders and personal income and outlays on Friday, all three reports at 8:30 a.m.

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I entered a shares position on COST timed to coincide with earnings. I also entered an options position on the symbol on the symbol.

ORCL shares rose after the company beat analysts estimates, allowing a profitable exit.

sym	entry	exit	result ($)	result (%)	entry date	exit date
COST	186.86	193.27	6.41	3.4%	12/14	12/15
	zacks rank	zacks esp	DI spread	ADX	earns est.	earns actual
	3	1.39	26.36	47.92	1.35	1.45

By Tim Bovee, Portland, Oregon, Dec. 14, 2017

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12/15 – 2:45 p.m. New York time

In today’s outcomes, I exited four earnings plays, three based on options — COST, JBL and ORCL — and one on COST using shares. All analyses have been updated with results. I entered no new positions.

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Oracle Corp. (ORCL)

Update 12/15/2017: ORCL’s earnings of $0.70 per share beat analysts’ consensus estimate of $0.69 by 1.1%. Shares dropped about $5 in after-hours trading, rising only slightly the next day after the opening bell. I exited for a loss.

Shares fell by 4.7% over my holding period of less than a day, or a -1,724% annual rate. The options position produced a 9.9% loss for a -3,622% annual rate.

As I entered the trade ORCL had a neutral (3) Zacks rank with an earnings surprise predictor (ESP) of -0.42%. Shares were showing a weak bull trend, with an average directional index (ADX) of 17.5 and a DI gap (+DI minus -DI) of 10.31. The ADX stood in the 11th percentile of its recent range.

ORCL’s fall from the pre-earns closing bell to the end of the first session of the announcement was $1.89, within the $2.33 average of the last four earnings announcements, the $3.33 central tendency and the $4.05 maximum.

The expected price move, with 85% accuracy, of $2.33 was eclipsed by a decline that, at its maximum, was down $3.19. The movement broke was close to being contained by the $3.14 profit zone to the downside, breaking below it by 5 cents.

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ORCL publishes earnings on Thursday after the closing bell.

I shall use options that trade for the last time eight days hence, on Dec. 22.

Implied volatility stands at 29%, which is 2.9 times the VIX, a measure of the volatility of the S&P 500 index.

ORCL’s IV stands in the 96th percentile of its annual range and most recent broad movement.

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Jabil Inc. (JBL)

Update 12/15/2017: JBL’s earnings of $0.80 per share came in 1.6% below the Street estimate of $0.81. Shares rose a dollar in after-hours trading after the announcement, stayed high overnight, and then a dollar in the 10 minutes before the opening bell and the first 10 minutes of the session. I exited soon after the open at 31.5% of maximum potential profit.

Shares rose by 1.7% during my holding period of less than a day, or a +637% annual rate. the options position produced a 46% return for a +16,790% annual rate.

Going into the trade Zacks gave JBL a neutral rank (3) with no expectation of an earnings surprise. The average directional index (ADX) stood at 17.4, with a directional index gap (+DI minus -DI) of -7.48, a bearish reversal. The ADX stood in the 45th percentile of its most recent broad movement.

JBL rose $0.42 from the pre-earns close to the end of the trading the first session after the announcement, stay well within the $1.54 average movement of the past four announcements, the central tendency of $1.24 and the maximum of $2.58.

The expected move of $1.55 contained JBL’s maximum rise of $1.13, which also stayed within the upside profit zone, $1.46.

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JBL publishes earnings on Thursday after the closing bell.

I shall use options that trade for the last time eight days hence, on Dec. 22.

Implied volatility stands at 36%, which is 3.5 times the VIX, a measure of the volatility of the S&P 500 index.

JBL’s IV stands in the 78th percentile of its annual range and the 82nd percentile of its most recent broad movement.

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