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Posts Tagged ‘Wells Fargo’

A Remarkably Safe Way To Play The Apple Earnings Announcement

Tuesday, January 22nd, 2013

Apple announces earnings Wednesday after the close and I have come up with a strategy that looks like it can make a decent gain for the week (ranging from 5% to 15%) with almost no chance of incurring a loss. 

The big downside of the strategy is that it requires an investment of about $16,000.  I understand that many subscribers are looking for less costly option investments.

 However, if you can afford an investment of this size, check out the Seeking Alpha article I wrote just yesterday. 

Terry 

Here is the link – A Remarkably Safe Way To Play The Apple Earnings Announcement 

This is the third week in a row that I have offered a strategy centering on the unusually-high option prices in the series that expires just after an earnings announcement. 

The first play was for Wells Fargo – How to Play the Wells Fargo Earnings Announcement for Tomorrow.  This one gained 44% after commissions. 

The second play involved eBay – How to Play the EBAY Earnings Announcement.  I waited too long to close out my spreads this time around (many subscribers gained 24% or more).  But I did manage to make 11.6% after commissions, still not a bad week. 

I think this week’s earnings-announcement play is the safest one yet in spite of the high cost  requirement.  I am also sharing with paid subscribers a most promising play in Starbucks (SBUX).

Closing Out the Wells Fargo Spreads

Friday, January 11th, 2013

Closing Out the Wells Fargo Spreads
Yesterday I shared with you some trades I made in advance of Wells Fargo’s (WFC) earnings announcement before the bell today.  I bought 30 Feb-13 – Jan2-13 35 call calendar spreads for $.34, shelling out $1020 plus $75 in commissions at thinkorswim.  I also bought 30 Feb-13 – Jan2-13 diagonal call spreads (buying 36 calls and selling 35.5) for a debit of $.16. (There is a small maintenance requirement here for one day.)  These cost me $480 plus $75 in commissions.  My total money at risk is $1500 plus $150 in commissions, or $1650.
Earnings slightly exceeded the whisper numbers but the stock fell about $.60 from yesterday’s close (a change which was well within the profit range.  Rather than try to squeeze out a few extra dollars of profit, I decided to take the gains that were there at 10:30.
I bought back the Jan2-13 expiring calls for $.03 (thinkorswim does not charge a commission when you buy back a short call for $.05 or less).  Then I sold the Feb-13 36 calls for $.31.  This worked out to a net credit of $.28 compared to the $.16 I had paid for the spread.
Then I placed a limit order to close out the 35 calendar spread for $.55 and it executed quickly.  That spread had cost me $.34 so there was a nice profit there as well.
In total, I collected $2490 for the two spreads and paid $112.50 in commissions for a net gain after commissions of $727.50 ($2387.50 – $1650.00).
These trades made 44% on the investment for the day.  I might have collected a bit more if I had waited, but as the old adages go, you don’t go broke taking profits, and bulls make money and bears make money but pigs get slaughtered.
It is a happy day for me whenever I can collect 44% after commissions for a day of trading.  Most people would be delighted to make that much on their money for an entire year.
I will be looking for similar pre-earnings plays where strong implied volatility advantages are often possible, and will pass them along to you.

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Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins