I'm creating this journal to keep track of my trades through all the chaos in options trading. I have $2,000 in an account and my goal for the end of this year is to double it. I know that options can help achieve that quick. End of next year, I hope to reach $10,000. My first trade will be a position in AMAT. Earnings are due out later this week, and chip sector has been on a roll. I like that AMAT has been flat heading into its earning this week trading in a tight $55-$57 range for the past 3 weeks. This should set up for a more powerful breakout if the numbers come in hot, and right now I don't expect the numbers to cool off at all especially given AVGO's bid for QCOM. There just seem to be a bid of lots of these stocks in the chips sector. Just saw NVDA break to new highs above $215, and MU is about to go up another leg. That leads to my second trade in MU. I know earnings aren't due until mid December, so I want to get a position using Jan options to cover the earnings play. Although, I believe MU should make a run up heading into earnings this time around before selling on the news. That's how I want to play this one.
This slow market allowed me to get both positions at a discount. I bought 1 MU Jan 2019 45 call @ 3.65 and 2 AMAT Nov 56 call @ 1.41 avg. price for its earnings play on Thursday after the market closes. Both positions together cost me ($659).
You mention the underlier; what about the $2,000 for options? What's the options B/A spread? ITM or OTM? and how far? directional or spread? covered or naked? What's the IV versus the HV? Have you looked at a 12 month chart? What about liquidity? heavily traded? How about sentiment? technical analysts? Has there been any ER surprises in the last three quarters? Is there a history of major stock movement after ER? Don't take any of the above personal, I'm having a super slow day today, but good luck anyway.
Options trading around the quarterly earnings game is risky business. You should instead try to develop a game plan and strategy that is more often or daily or much more regular and steady intervals. That's just my random opinion. If you're confident and you think you have something...then by all means go ahead. Don't let my opinion or any one other's steer you...you're your own man. Remember: trading is a war zone -- design the game to your favor, or skill, any way you can. Consider all the collective, dynamic variables in play. I say it all the time...Trading is part Art, Part science -- it requires the use of both your Right brain, and left brain.
I hope you are aware these options have already appreciated in value over the past few months, and you are hoping that the news will appreciate the option value even further.
Options on AMAT are more on the heavy side in terms of volume, so the bid/ask are less than 0.10 throughout the day. These are at the money options on a short term play. In fact, I'm only playing AMAT's earning on Thursday for the AMAT options. IV is expected to be up the roof at this point. I've stopped looking at IV because for such options they are expected to be elevated. The race here is between how wrong most of the traders are vs. actual earning results. On the sentiment side, like I've said chips are clearly the leader this year with the majority of stocks in this sector climbing higher. The last 2 quarters, AMAT has hit a high avg of about 4-5% the day after earnings were reported. The thing I like most about this quarter is how it's been consolidating the past 3 weeks. I believe traders are waiting for the next move, and if earnings come out strong, AMAT should jump to $58-$59. This is also based on the fact that some of its top peers like LRCX reported strong results just weeks before. Of course, I could be wrong, and AMAT's earnings start decelerating causing the stock to fall back to $52.
What I'm hoping for here is that 3 weeks of consolidation should be enough to bring in new money should AMAT surprise to the upside. Had AMAT's chart been in more of a climb over the past 3-4 week period, the risk would have been too high because such a chart would have implied traders already betting on a beat.
I was going to stay out of WMT with its report due out tomorrow, but TGT announcement pressures heading into the Christmas shopping season. This leads me to believe that WMT is taking a small portion of TGT's lunch this holiday season. Well, this is a risk account, and I believe WMT shares will climb higher if the conference call tomorrow morning does not include phrases such as "pricing pressure" in it. WMT broke out back at $82 and has made a quick 10% gain since. It's tight up here, but I think $95 by black Friday is possible for a 15% pop since it's breakout at $82. I think if there is a move most of it will happen by Monday. I just took 1 WMT Nov week 4 91 call at 1.54 for ($160). My total cost is fairly high already at about ($820). I just believe that with investors already leaving TGT with that -9% drop today, they are going to put that money somewhere. If WMT can surprise tomorrow by showing they can handle AMZN this holiday, then some of that money should jump into WMT. This will be a short term 2 week play for me, so I'm not even looking into WMT's holiday results. I just want to know that WMT believes in itself heading into black Friday.
Interesting to see shares of $WMT up much higher than I expected. My after earnings target was $93 with a slow climb to $95 by Monday. I didn't any comments about pricing pressures in the reports, so $WMT believes it can compete with $AMZN. It also raised guidance for the FY to $4.38-$4.46 vs. $4.38. I think my only mistake was expecting the shares to take more time to trade above $95. I still believe shares will have upside momentum heading into Thanksgiving, so I will have to close out the WMT Nov week 4 91 call today and roll up to a 95 or higher call to see if I can capture more of this move. $AMAT is the trade I'm more interested in today with that report due out after the market closes. It does look like the market is going to break out of its week long slump and catch a bid today.