Here’s a couple of long, a short, and a couple earnings trade ideas for this week:
Under Armour (UA) recently reported earnings that the market liked. This stock has been steadily trending higher and just broke-out of a trading range. I like this name long but I want theta on my side so I like selling put spreads in this zone.
Priceline.com (PCLN) has seen some weakness and large distribution lately. I want to play the descending channel and sell the high IV so I am looking at short call spreads when the stock is near the $715 level. If the stock looks weak tomorrow, I may try a broken wing put fly aiming to collect a credit if the stock does move higher. PCLN is set to report earnings on 5/9/12 so I want to play this using the April weeklies.
Apple (AAPL) is set to report earnings on 4/24/12 AMC and this is a report I want to play. The options market is currently pricing-in a move of about $41 or 7.2%. During the last 4 quarters, Apple has had moves of about -6% to +8%. I like selling the vol here, specifically, using a 100-point wide iron condor. The April weekly 515/520/620/625 iron condor is a lot wider than the straddle is pricing-in but, at current prices, the trade still stands to return a max ROR of 35.5% ($139/$381) per spread. However, I plan to enter my trade about an hour or so before the market close so I may adjust my strikes accordingly.
Baidu (BIDU) is also reporting earnings 4/24/12 AMC. The options market is currently pricing-in a $10.25 (7.3%). The last 4 quarters have seen moves ranging from -2% to +6.7%. I also want to be short front vol here but will hedge it with back vol. The trade I am looking at is an April weekly/May 125/130/155/160 double diagonal. Again, the strikes of choice are wider than the move priced-in by the straddle because I am willing to give-up some reward for a little more protection. I modeled a -35%/-5% (April weekly/May) overnight vol crush for this trade.
- Quick Take On The Markets & Watchlist
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- Reader Question: Butterflies and Implied Volatility Skew
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- Defensive Sectors Leading The Market & Watchlist
- Breaking Down This Week’s Winners & Watchlist For Next Week
- What Sectors Are Leading The Market?
- Market Strength and My Watchlist
- Implied Volatility Skew and What It Tells Us
- An Interesting Take on Selling Implied Volatility Here