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.

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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.

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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.

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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.

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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.

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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.

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I have entered earnings plays on RPM and WBA using long shares.

For both the average directional index (ADX) is below 25, the transition from non-trending to trending, but the positive earnings surprise indexes (ESP) from Zacks is large enough to make the trades attractive.

I exited the next day. RPM beat its earnings estimates by a dime and the price rose. WBA failed by reach the estimates by two cents, and the price fell. Both at high ESP scores — RPM the highest — and WBA had the more bullish trend scores, with a higher ADX and a wider spread between the two directional index (+DI, -DI). The analysis failed in the case of WBA.

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Walgreens Boots Alliance Inc. (WBA)

I have passed a short iron fly spread on WBA, using options that trade for the last time nine days hence, on Jan. 12.

The bid/ask spread, at 29.9%, is too wide for my taste. I prefer single digits. Another problem lies with the long call leg; the strike closest to my goal of delta 10 has a delta of 20. The next highest jumps down to delta 3.

The profit zone for this position is between $78.50 to the upside and $74 to the downside.

WBA publishes earnings on Thursday after the closing bell.

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Monsanto Co. (MON)

I have passed a short iron fly spread on MON, using options that trade for the last time nine days hence, on Jan. 12. The bid/ask spread, at 42.2%, is too wide to meet my standards.

The profit zone for this position is between $119.55 to the upside and $113.55 to the downside.

MON publishes earnings on Thursday after the closing bell.

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1/3 – 3:10 p.m. New York time

I entered shares positions on RPM and WBA, and exited no positions. I analyzed MON and WBA as options positions but declined the trades.

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Monday is New Year’s Day, and markets will be closed in New York, London, Tokyo and Sydney.

The monthly employment situation report will be published on Friday at 8:30 a.m. New York time, starting off the first week of 2018 with a high-impact report. Simultaneously, another major report, international trade, will also be released.

The employment reporting gets a sneak preview on Thursday at 8:15 a.m. with the private-sector ADP employment report.

One other top report will be out during the week: The Institute of Supply Management manufacturing survey on Monday at 10 a.m.

Also, the Federal Open Market Committee minutes of its Dec. 13 meeting will be released on Wednesday at 2 p.m. At that meeting the FOMC raised the target for the federal funds rate from 1.25% to 1.5%, continuing its gradual tightening as the economy recovers. Two members, Chicago Fed Pres. Charles Evans and Minneapolis Fed Pres. Neel Kashkari, dissented, preferring to keep the target unchanged.

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