PCLN earnings since 1999, a total of 42 (N=42) Earnings with less than 10% move= 14, which is 33% Earnings with 1020% move 18, which is 42% Earnings with more than 20% move 10, which is 24%
In summary, the odds of PCLN moving more than 10% after earnings is 67% BROKER PRICE TARGET
PRICE TARGET SUMMARY Mean Target: 195.08 Median Target: 200.00 High Target: 235.00 Low Target: 150.00 No. of Brokers: 13 JPM and Kaufman Bros have 200210 as the price target on PCLN. It has no resistance until 200210, which was the support in May 2006! Isn't that amazing the analyst price target and the next resistance level match exactly.
With so many shorts waiting to pounce on it for earnings, I will not be surprised to see it going to 200 in one final short squeeze climax STRATEGY
I usually close my options the day after earnings but with PCLN I may keep it until Nov opex with the following strategy
50% BF Call spread (180/200/220) and 50% BF Put spread (165/145/125). Looks like low risk and good reward to me as long as PCLN closes between 190200 or between 145155 at opex.
Is the above strategy better than 50% Nov 165/150 put spread and 50% Nov 180/195 call spread strategy?
The above strategy is subject to change. I will update what strategy I employ tomorrow between 34 PM
UPDATE: Bought Nov 180/200 call spread ONLY. I rarely do this but this one is a pure Lotto play. For a high reward strategy, visit Annamall's website.
hai pramod.. do you mean that you are going to set the 2 spread? put n call? for debit or credit? looks like iron condor? and i see that you always play withe earnings?
Yes, it is similar to an Iron condor with a slight bullish bias. when I am not sure about the direction, I usually do stangle/straddles or call and put spreads when the options have a high premium. The strategy I posted has a profit range of 075% depending on how much percentage PCLN moves. If it moves less than 5%, which has a very low probability, I may lose 10% of my investment.
sorry for asking a simple question. do you get a credit? if so, it will be like this? SELL 1 IRON CONDOR PCLN 100 NOV 09 180/195/165/160 CALL/PUT @5.45 LMT i dont think it is a bullish or it is so? or just the other side? and you always look at the probability of the earning as the basic information for your earning position isnt it? thanx
The debit for Nov 165/150 put spread would be 4.00 (Max return of 1415, i.e., about 250%) and the debit for Nov 180/195 call spread would be 3.5 (Max return of 1415, i.e., about 280%)
If I am planning to deploy 2K in this trade, I would probably use $9001000 for the put spread and 10001100 for the call spread.
oh i see.. but pra,sorry again,put spread is about 4.00 and the maximum gain is about 10.97. how canit be 1415 i see in my risk graph max is 10.97 and the call spread is 11.40 and if i am not mistaken if you take this two,the risk will be 7.5 and the reward is about 7.5. just 100% i dont get it what you are posting sorry cause i am a newbie.. thanx
I use Optionsxpress to calculate theoretical vaule. When I entered 220 as the trading value for PCLN, the theoretical value of Nov 180 calls is 40.50 and for Nov 195 is 26. The difference comes to 14.50.
This is the breakdown of theoretical value of call and put spreads based on PCLN price after earnings
PCLN trades at 210: the call spread will be 13
PCLN trades at 200: Call spread will be 11.50
PCLN trades at 190: call spread will be 8.5 and the put spread will be 0.6
PCLN trades at 180: call spread will be 5 and put spread will be 1.6
PCLN trades at 170: put spread will be 4 and call spread will be 2.50
PCLN trades at 160: put spread will be 7 and call spread will be 1
PCLN trades at 150: Put spread will be 11.50
PCLN trades at 140: put spread will be 13
PCLN trades at 130: put spread will be 15
You need 20% or greater move to get 250300% returns.
The only way you lose money is if PCLN trades between 170 and 180 because your spreads will trade at 6.56.6 and assuming cost price is 7.5 (4.0 for put spread and 3.5 for call spread), it is about 1015% loss. Above 180 and below 160, you should make 0.175% profit
thanx pramod what a full explanation.. but that i stil dont understand.. it that the theoritical value dosent move? the theoretical value of Nov 180 calls is 40.50 and for Nov 195 is 26. it will change due of time isnt it?
you dont use the analyze graph to see where the exactly profit/loss will be when the price is moving.. i just dont get it it should be 100% i use TOS. can i send you picture? sorry for my acknowledgement..
I am talking about the theoretical values the day after earnings and not at options expiration. I always close my options within a day or two after earnings.
Say if PCLN is trading at 210 the day after earnings, both 180 and 195 calls will be ITM. The 180 call will trade at 3031 (210180) and the 195 call will trade at 1516, so the difference will be 1415, which will be 280% returns for the call spread (Cost basis is 3.5 and return is 1415). HOWEVER, YOUR OVERALL RETURN WILL NOT BE 280% BECAUSE YOUR PUT SPREAD HAS LOST VALUE.
IF YOU PUT 1K EACH IN CALL AND PUT SPREAD AND IF PCLN GOES TO 210, THE CALL SPREAD WILL BE TRADING AT 3.5 AND THE PUT SPREAD WILL BE ZERO. SO YOUR 2K INVESTMENT WILL BE 3.5K, WHICH IS A 75% RETURN.
HENCE MY REASONING THE RETURN WILL BE BETWEEN 0.175% IF PCLN IS ABOVE 180 OR BELOW 160 THE DAY AFTER EARNINGS
IF YOU PUT 1K EACH IN CALL AND PUT SPREAD AND IF PCLN GOES TO 210, THE CALL SPREAD WILL BE TRADING AT 3.5K AND THE PUT SPREAD WILL BE ZERO. SO YOUR 2K INVESTMENT WILL BE 3.5K, WHICH IS A 75% RETURN.
HENCE MY REASONING THE RETURN WILL BE BETWEEN 0.175% IF PCLN IS ABOVE 180 OR BELOW 160 THE DAY AFTER EARNINGS
oh i get it.. just the day after the earning... do you play most of earning time?? i see it is quite a little gambling but from your odds and probability, i think it will make sense of it good risk and reward.. by the way how you get the number of odds and probability of earning? thax
With the strategy I posted, you may lose 1015% if PCLN is between 160180 the day after earnings. However, if it trades above 180 or below 160, which has a high probability, you can make up to 75% profit. If it trades either at 150 or 210, the profit would be 6075%. The max loss would be 15% and the max gain would be 6075%. In summary, it is a low risk, lowmedium reward strategy for me.
Do you play most of earning time??
The answer is NO. I do earnings play only if
1. The stock has a high short interest. My cut off is at least 1520% short interest for stocks with less than 100 million shares outstanding and at least 10% for stocks with more than 100 million shares outstanding AND
2. There is a high probability that it will move more than 10% after earnings
How you get the number of odds and probability of earning?
http://busystock.com/earning.php?cap=%3E5000
and type in the symbol at the top right hand corner to look at the past earnings history.
If you find any of the information on this site useful and would like to donate, please donate to any good cause of your choice or donate to suffering children (UNICEF). I am running this blog as a hobby and not for money! Thank you.
The content on this site is provided as information only and should not be taken as an investment advice. This site's content shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author and are for entertainment purposes only. Any investment decision that results in losses or gains made based on any information on this site is not the responsibility of the author.
I have been trading stocks since 2008 and options since 2009. I developed an interest in stock market from my mom, who has been trading in India since 1992. I have a day job and I primarily trade for fun. My interests are technical analysis and trading options. I primarily use support and resistance levels, fibonacci retracement levels, MACD and RSI as my trading tools. To me, Elliot waves are good to explain past market movements but they are not as good in predicting future market direction.
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hai pramod..
ReplyDeletedo you mean that you are going to set the 2 spread?
put n call? for debit or credit?
looks like iron condor?
and i see that you always play withe earnings?
Dear soem,
ReplyDeleteYes, it is similar to an Iron condor with a slight bullish bias. when I am not sure about the direction, I usually do stangle/straddles or call and put spreads when the options have a high premium. The strategy I posted has a profit range of 075% depending on how much percentage PCLN moves. If it moves less than 5%, which has a very low probability, I may lose 10% of my investment.
GL
sorry for asking a simple question.
ReplyDeletedo you get a credit? if so, it will be like this?
SELL 1 IRON CONDOR PCLN 100 NOV 09 180/195/165/160 CALL/PUT @5.45 LMT
i dont think it is a bullish or it is so?
or just the other side?
and you always look at the probability of the earning as the basic information for your earning position isnt it?
thanx
The debit for Nov 165/150 put spread would be 4.00 (Max return of 1415, i.e., about 250%) and the debit for Nov 180/195 call spread would be 3.5 (Max return of 1415, i.e., about 280%)
ReplyDeleteIf I am planning to deploy 2K in this trade, I would probably use $9001000 for the put spread and 10001100 for the call spread.
oh i see..
ReplyDeletebut pra,sorry again,put spread is about 4.00 and the maximum gain is about 10.97. how canit be 1415
i see in my risk graph max is 10.97
and the call spread is 11.40
and if i am not mistaken if you take this two,the risk will be 7.5 and the reward is about 7.5. just 100%
i dont get it what you are posting
sorry cause i am a newbie..
thanx
Dear Soem,
ReplyDeleteI use Optionsxpress to calculate theoretical vaule. When I entered 220 as the trading value for PCLN, the theoretical value of Nov 180 calls is 40.50 and for Nov 195 is 26. The difference comes to 14.50.
This is the breakdown of theoretical value of call and put spreads based on PCLN price after earnings
PCLN trades at 210: the call spread will be 13
PCLN trades at 200: Call spread will be 11.50
PCLN trades at 190: call spread will be 8.5 and the put spread will be 0.6
PCLN trades at 180: call spread will be 5 and put spread will be 1.6
PCLN trades at 170: put spread will be 4 and call spread will be 2.50
PCLN trades at 160: put spread will be 7 and call spread will be 1
PCLN trades at 150: Put spread will be 11.50
PCLN trades at 140: put spread will be 13
PCLN trades at 130: put spread will be 15
You need 20% or greater move to get 250300% returns.
The only way you lose money is if PCLN trades between 170 and 180 because your spreads will trade at 6.56.6 and assuming cost price is 7.5 (4.0 for put spread and 3.5 for call spread), it is about 1015% loss. Above 180 and below 160, you should make 0.175% profit
ReplyDeleteI meant above 180 and below 170, you should make 0.175% profit
ReplyDeletethanx pramod
ReplyDeletewhat a full explanation..
but that i stil dont understand..
it that the theoritical value dosent move?
the theoretical value of Nov 180 calls is 40.50 and for Nov 195 is 26.
it will change due of time isnt it?
you dont use the analyze graph to see where the exactly profit/loss will be when the price is moving..
i just dont get it
it should be 100%
i use TOS.
can i send you picture?
sorry for my acknowledgement..
Dear Soem,
ReplyDeleteI am talking about the theoretical values the day after earnings and not at options expiration. I always close my options within a day or two after earnings.
Say if PCLN is trading at 210 the day after earnings, both 180 and 195 calls will be ITM. The 180 call will trade at 3031 (210180) and the 195 call will trade at 1516, so the difference will be 1415, which will be 280% returns for the call spread (Cost basis is 3.5 and return is 1415). HOWEVER, YOUR OVERALL RETURN WILL NOT BE 280% BECAUSE YOUR PUT SPREAD HAS LOST VALUE.
IF YOU PUT 1K EACH IN CALL AND PUT SPREAD AND IF PCLN GOES TO 210, THE CALL SPREAD WILL BE TRADING AT 3.5 AND THE PUT SPREAD WILL BE ZERO. SO YOUR 2K INVESTMENT WILL BE 3.5K, WHICH IS A 75% RETURN.
HENCE MY REASONING THE RETURN WILL BE BETWEEN 0.175% IF PCLN IS ABOVE 180 OR BELOW 160 THE DAY AFTER EARNINGS
IF YOU PUT 1K EACH IN CALL AND PUT SPREAD AND IF PCLN GOES TO 210, THE CALL SPREAD WILL BE TRADING AT 3.5K AND THE PUT SPREAD WILL BE ZERO. SO YOUR 2K INVESTMENT WILL BE 3.5K, WHICH IS A 75% RETURN.
ReplyDeleteHENCE MY REASONING THE RETURN WILL BE BETWEEN 0.175% IF PCLN IS ABOVE 180 OR BELOW 160 THE DAY AFTER EARNINGS
oh i get it..
ReplyDeletejust the day after the earning...
do you play most of earning time??
i see it is quite a little gambling
but from your odds and probability, i think it will make sense of it
good risk and reward..
by the way
how you get the number of odds and probability of earning? thax
Dear Soem,
ReplyDeleteWith the strategy I posted, you may lose 1015% if PCLN is between 160180 the day after earnings. However, if it trades above 180 or below 160, which has a high probability, you can make up to 75% profit. If it trades either at 150 or 210, the profit would be 6075%. The max loss would be 15% and the max gain would be 6075%. In summary, it is a low risk, lowmedium reward strategy for me.
Do you play most of earning time??
The answer is NO. I do earnings play only if
1. The stock has a high short interest. My cut off is at least 1520% short interest for stocks with less than 100 million shares outstanding and at least 10% for stocks with more than 100 million shares outstanding AND
2. There is a high probability that it will move more than 10% after earnings
How you get the number of odds and probability of earning?
http://busystock.com/earning.php?cap=%3E5000
and type in the symbol at the top right hand corner to look at the past earnings history.