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Posts Tagged ‘Earnings Option Strategy’

Has Netflix (NFLX) Found A Bottom?

Saturday, September 15th, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.  The actual portfolio that Terry’s Tips carries out with these plays we send to you each week has gained 98.5% so far this year.  We started out 2018 with $5000 in the portfolio and withdrew that amount in June so that subscribers who mirrored it in their own account or had trades executed for them with the free Auto-Trade service at thinkorswim have almost $5000 left and it is entirely profits for them.

Terry

Has Netflix (NFLX) Found A Bottom?

Despite a recent correction, market sentiment towards Netflix stock remains positive while certain analysts see a notable upside from current levels.  Take a look at this recent article posted on Investopedia that states a 30% rally could be in the cards for NFLX and the following article posted on Seeking Alpha that builds a strong case for remaining bullish.

There are several technical developments over the last month or so that suggest Netflix has turned bullish once again.  The stock price is seen climbing above horizontal resistance at $356 and holding above the 20-day moving average.  Aside from that, a recent convergence with the S&P 500 might be sending the strongest signal of all.  Note that NFLX diverged from the index for about a month starting from mid-July to correct lower.  Since around the middle of August, the stock price has once regained its correlation with the popular index, which is often a tell that an important bottom might be in place.  The S&P 500 is added to the chart below and denoted in bars to illustrate the divergence and subsequent convergence.

NFLX Chart September 2018

NFLX Chart September 2018

*source Tradingview.com

If you agree there’s further upside ahead for NFLX, consider this trade which is a bet that the stock will continue to advance over the next four weeks, at least a little bit.

Buy To Open NFLX 12OCT18 362.5 Puts (NFLX181012P362.5)
Sell To Open NFLX 12OCT18 365 Puts (NFLX181012P365) for a credit of $1.18 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when NFLX was trading near $365.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $115.50 and your broker would charge a $250 maintenance fee, making your investment $134.50 ($250 – $115.50).  If NFLX closes at any price above $365 on October 12, both options would expire worthless, and your return on the spread would be 86% (1256% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates September 13, 2018

IBD Underlying Updates September 13, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Can GrubHub (GRUB) Continue the Upside Momentum?

Monday, September 3rd, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

The Terry’s Tips portfolio that takes actual positions in most of these weekly ideas has gained 88% (after commissions) so far in 2018, taking all the completed gains and losses into consideration.  The portfolio currently has five spreads in place, and all of the underlying stocks are trading at a price which is higher than the max gain bogey price, so we are looking for even better results going forward.

Terry

Can GrubHub (GRUB) Continue the Upside Momentum?

GrubHub’s stock price recently broke to record highs and these two analysts are optimistic there’s further growth ahead – Why GrubHub Is a Better Growth Stock Than Starbucks and Is GrubHub (GRUB) Outperforming Other Computer and Technology Stocks This Year?

GRUB fell into a consolidation in the first half of August after turning from resistance around $138.  The stock price regained some upside momentum in the second half of the month, breaking both above resistance and to fresh record highs.  The horizontal level is now seen as support in the event of a near-term pullback.  The higher time frames show a clearer outlook as the weekly chart shows a distinct upward continuation from the prior consolidation.  On a Monthly chart, the stock closed near highs which indicates strength.  As well, it managed to do so despite a long tail on the prior candle which suggests the selling pressure in late July was temporary.

GRUB Chart August 2018

GRUB Chart August 2018

If you agree there’s further upside ahead for GRUB, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open GRUB 05OCT18 141 Puts (GRUB181005P141)
Sell To Open GRUB 05OCT18 144 Puts (GRUB181005P144) for a credit of $1.33 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when GRUB was trading near $144.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $130.50 and your broker would charge a $300 maintenance fee, making your investment $169.50 ($300 – $130.50).  If GRUB closes at any price above $144 on October 05, both options would expire worthless, and your return on the spread would be 77% (878% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates August 30, 2018

IBD Underlying Updates August 30, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Monolithic Power Systems (MPWR) Poised to Break to Record Highs

Sunday, August 19th, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Terry

Monolithic Power Systems (MPWR) Poised to Break to Record Highs

There have been some recent price target upgrades for MPWR that suggest the stock still has some further upside.  Here are two of them – Monolithic Power Systems (MPWR) PT raised to $155 at Needham & Company and Brokerages Set Monolithic Power Systems, Inc. (MPWR) PT at $148.38.

The daily chart for MPWR shows three attempts at upside resistance found near $142.  As triple top patterns are rare, even more so with strong uptrends like the one seen in MPWR, and upside break appears highly likely.  As well, often stop losses get accumulated above notable horizontal levels.  Once triggered, these stops provide fuel for a momentum-driven rally.  The stock looks to be well supported as it recently recovered back above its 50-day moving average following a brief correction and has been consolidating in a range between prior highs and the 50 DMA.

MPWR Chart August 2018

MPWR Chart August 2018

*source Tradingview.com

If you agree there’s further upside ahead for MPWR, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open MPWR 21SEP18 135 Puts (MPWR180921P135)
Sell To Open MPWR 21SEP18 140 Puts (MPWR180921P140) for a credit of $1.68 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MPWR was trading near $142.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $165.50 and your broker would charge a $500 maintenance fee, making your investment $334.50 ($500 – $165.50).  If MPWR closes at any price above $140 on September 21, both options would expire worthless, and your return on the spread would be 50% (570% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates August 16, 2018

IBD Underlying Updates August 16, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Match Group (MTCH) Surges to Record Highs, What’s Next?

Monday, August 13th, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Terry

Match Group (MTCH) Surges to Record Highs, What’s Next?

Match Group broke to record highs in the past week and several analysts believe there is more upside, here are two of them – Match Group Is Still Undervalued and Wall Street is Falling in Love With Match Stock.

The main focus from a technical perspective is the upside momentum triggered by the recent earnings beat.  MTCH climbed above major resistance that is found between $47.00 and $48.65 to trade to record highs.  Recall that the stock traded in this resistance area ahead of the steep fall on news of Facebook launching a new dating service at the start of May.  In the process of breaking to new highs, a succession of higher highs and lower highs has materialized from the May low.  As often seen, the prior resistance area is now considered strong support, suggesting that dips in the stock will be short-lived.

MTCH Chart August 2018

MTCH Chart August 2018

*source Tradingview.com

If you agree there’s further upside ahead for MTCH, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open MTCH 21SEP18 47 Puts (MTCH180821P47)
Sell To Open MTCH 21SEP18 50 Puts (MTCH180821P50) for a credit of $1.03 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MTCH was trading near $51.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $100.50 and your broker would charge a $300 maintenance fee, making your investment $199.50 ($300 – $100.50).  If MTCH closes at any price above $50 on September 21, both options would expire worthless, and your return on the spread would be 50% (468% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates August 9, 2018

IBD Underlying Updates August 9, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Should You Buy the PayPal (PYPL) Earnings Dip?

Monday, July 30th, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Terry

Should You Buy the PayPal (PYPL) Earnings Dip?

PayPal recently reported earnings and this Zack’s article outlines why the stock price dipped despite beating estimates.  Also, an author on Seeking Alpha outlines why the decline following earnings can be viewed as a merely a speed bump in the broader bullish trend.

PYPL did close earlier on the day after the earnings announcement, however, the bulk of last week’s decline took place on Friday as the markets reacted to US GDP figures and weak earnings in other technology stocks.  This left PayPal stock at a major support confluence to end the week.  The confluence consists of a horizontal level at 85.45 which was major resistance in the first quarter now turned to support, as well as the lower bound of a rising trend channel that originates from a low posted in early May.  Although there was some momentum behind Friday’s decline, recent price action has not altered the bullish technical outlook for PYPL.

PYPL Chart July 2018

PYPL Chart July 2018

If you agree there’s further upside ahead for PYPL, consider this trade which is a bet that the stock will continue to advance over the next five weeks, at least a little bit.

Buy To Open PYPL 31AUG18 83 Puts (PYPL180831P83)
Sell To Open PYPL 31AUG18 85.5 Puts (PYPL180831P85.5) for a credit of $0.98 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when PYPL was trading near $85.50.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $95.50 and your broker would charge a $250 maintenance fee, making your investment $154.50 ($250 – $95.50).  If PYPL closes at any price above $85.50 on August 31, both options would expire worthless, and your return on the spread would be 62% (707% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates July 26, 2018

IBD Underlying Updates July 26, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Palo Alto Networks (PANW) Breaks to Record Highs, What’s Next?

Sunday, July 15th, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Terry

Palo Alto Networks (PANW) Breaks to Record Highs, What’s Next?

Palo Alto Networks has seen a remarkable rise in its stock price over the last few years and several articles on The Motley Fool suggest there will be further upside.  Here are the latest two – Palo Alto Networks’ Bull Run Probably Won’t Be Ending Anytime Soon and Forget Cryptocurrencies: You’re Better Off Buying These 3 Stocks.

On a daily chart, PANW appears to be consolidating in a range since around the middle of May.  However, a closer look reveals a notable technical break.  Range support near $200 wasn’t just important because of the psychological implications, the level also triggered a sharp turn in 2015 that led to a two-year correction.  Although there have been marginal breaches below the level since the stock price initially climbed above it a few months ago, bears have been unable to drive the stock price below it on a sustained basis.  To the upside, resistance near $216 had capped rallies in June but the recent bullish break of the level suggests the uptrend has resumed.

PANW Chart July 2018

PANW Chart July 2018

*source Tradingview.com

If you agree there’s further upside ahead for PANW, consider this trade which is a bet that the stock will continue to advance over the next six weeks, or at least not decline very much.

Buy To Open PANW 24AUG18 212.5 Puts (PANW180824P212.5)
Sell To Open PANW 24AUG18 215 Puts (PANW180824P215) for a credit of $0.95 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when PANW was trading near $216.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $92.50 and your broker would charge a $250 maintenance fee, making your investment $157.50 ($250 – $92.50).  If PANW closes at any price above $215 on August 24, both options would expire worthless, and your return on the spread would be 59% (552% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates July 12, 2018

IBD Underlying Updates July 12, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Micron Technology (MU) Dips To Support, Is It a Buy?

Sunday, July 8th, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Terry

Micron Technology (MU) Dips To Support, Is It a Buy?

Micron Technology stock has been impacted by negative headline news as of late but these following two articles make a strong case for why this news is not likely to cause bearish pressure for the stock price moving forward.  Micron’s China Woes May Not Be the Disaster Investors Thought and Micron Technology is rebounding after saying China ban will have minimal impact.

MU has been correcting lower since the end of May but is seen trading near an important technical inflection point, and has already shown signs of buyer’s protecting the area.  The support area is derived from a rising trendline that originates back to a low printed in August last year as well as a horizontal level at $49.62.  The rising trendline last triggered a bounce in May which led to a break to record highs.  The horizontal level carries psychological properties as it falls near $50.  The level acted as major resistance in late 2017 and is now seen as support.

MU Chart July 2018

MU Chart July 2018

*source Tradingview.com

If you agree there’s further upside ahead for MU, consider this trade which is a bet that the stock will continue to advance over the next six weeks, or at least not decline very much.

Buy To Open MU 17AUG18 50 Puts (MU180817P50)
Sell To Open MU 17AUG18 52.5 Puts (MU180817P52.5) for a credit of $0.98 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MU was trading near $53.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $95.50 and your broker would charge a $250 maintenance fee, making your investment $154.50 ($250 – $95.50).  If MU closes at any price above $52.50 on August 17, both options would expire worthless, and your return on the spread would be 62% (580% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates July 5, 2018

IBD Underlying Updates July 5, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Has The Tide Turned in Paycom Software (PAYC)?

Saturday, June 16th, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Terry

Has The Tide Turned in Paycom Software (PAYC)?

Investor’s Business Daily, the website belonging to the creators of the IBD Top 50 list, named PAYC their IBD Stock of the Day on Friday.  Take a look at the article here for the reason behind the choice.  As well, an article published on The Motley Fool explains why Paycom Software is one of three stocks the analyst just added to his retirement portfolio.

After consolidating lower within a correction for about a month or so, PAYC has turned decisively higher, crossing above an important barrier.  Two prior attempts since May at the horizontal resistance level near $110 resulted in a notable correction, however, the stock managed to climb above it last week to signal that bulls may be retaking control.  The level has been significant since April, acting as both support and resistance.  In addition to the horizontal level, the stock has comfortably regained its 20-day moving average and trades near 52-week highs.

PAYC Chart June 2018

PAYC Chart June 2018

*source Tradingview.com

If you agree there’s further upside ahead for PAYC, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open PAYC 20JUL18 105 Puts (PAYC180720P105)
Sell To Open PAYC 20JUL18 110 Puts (PAYC180720P110) for a credit of $1.33 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when PAYC was trading near $112.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $130.50 and your broker would charge a $500 maintenance fee, making your investment $369.50 ($500 – $130.50).  If PAYC closes at any price above $110 on July 20, both options would expire worthless, and your return on the spread would be 35% (399% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates June 14, 2018

IBD Underlying Updates June 14, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Can Nvidia (NVDA) Continue Its Earnings-driven momentum?

Monday, May 28th, 2018

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

The real-life Terry’s Tips portfolio that trades these spreads has gained 97% so far in 2018, and has 4 spreads in place that will increase the gain to 123% in 3 weeks if the underlying stock prices hold their current prices or go up by any amount. And the year will not be half over by then.  Clearly, we have some happy campers who subscribe to our newsletter service, especially those who are having trades placed in their account through the Auto-Trade service offered by thinkorswim.

Terry

Can Nvidia (NVDA) Continue Its Earnings-driven momentum?

Several analysts have renewed their bullish NVDA outlook following their recent earnings report.  Here are two of them – Why Nvidia (NVDA) Is a Strong Buy and Nvidia Seen Soaring to Record on Explosive Growth.

NVDA pushed firmly higher following earnings earlier this month, gapping above a horizontal level at $239.  After briefly piercing to a record high, the stock has consolidated lower.  Buyers have stepped in slightly ahead of the horizontal level with the 20-day moving average providing additional support.  This area remains an important zone of support for NVDA.

NVDA Chart May 2018

NVDA Chart May 2018

*source Tradingview.com

If you agree there’s further upside ahead for NVDA, consider this trade which is a bet that the stock will continue to advance over the next four weeks, or at least not decline very much.

Buy To Open NVDA 22JUN18 242.5 Puts (NVDA180622P242.5)
Sell To Open NVDA 22JUN18 245 Puts (NVDA180622P245) for a credit of $0.93 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when NVDA was trading near $249.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $90.50 and your broker would charge a $250 maintenance fee, making your investment $159.50 ($250 – $90.50).  If NVDA closes at any price above $242.5 on June 22, both options would expire worthless, and your return on the spread would be 68% (834% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates May 25, 2018

IBD Underlying Updates May 25, 2018

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Diagonal Condor Earnings Strategy Update #5 – Mastercard (MA)

Tuesday, April 24th, 2018

When using the Diagonal Condor Earnings Strategy, one of the things we like to find is a stock about to announce earnings where the options have priced in a post-announcement price fluctuation which is greater than the historical average of the post-announcement changes for that company.

Our goal is to create two diagonal spreads at a credit (or slight debit) which allow for a profit to be made if the post-announcement fluctuation is within the historical average amount.  In the past few weeks, we have placed spreads that met these criteria on several companies, including Carmax (KMX), TD Ameritrade (AMTD), and Red Hat (RHT), and these plays were all profitable, with returns from 30% to over 70% including commissions in a single week.

This week, we are looking forward to taking a position in Mastercard (MA) which announces earnings before the market opens on May 2.  The 4May18 options have priced a 3.8% post-announcement price change while the average change for the last eight quarters has been only 1.1% (about $2 when the stock is trading about $175).

Here are the trades we made this week using the Diagonal Condor Earnings Strategy that is outlined here in case you missed it earlier. Here are the spreads we will place just prior to May 2 (prices as they exist now):

Buy To Open MA 1Jun18 170 puts (MA180601P170)
Sell To Open MA 4May18 175 puts (MA180504P175) for a credit of $.25 (buying a diagonal)

Buy To Open MA 1Jun18 182.5 calls (MA180601C182.5)
Sell To Open MA 4May18 177.5 calls (MA180504C177.5) for a credit of $.17 (buying a diagonal)

After paying a commission of $2.50 per spread at the commission rate charged to Terry’s Tips subscribers at thinkorswim, each pair of spreads will incur a maintenance requirement of $500 less the $42 plus the $5 commission, making it an investment of $463 (the maximum theoretical loss).  One of the spreads is guaranteed to make a gain no matter what the stock might do after the announcement.

Here is the risk profile graph for the above spreads, assuming that implied volatility (IV) of the 1Jun18 option series will fall by 3, from 28 to 25 after the announcement.  This compares to the current IV of the 4May18 series which carries an IV of 35.

MA Risk Profile Graph April 2018

MA Risk Profile Graph April 2018

The break-even range for these positions goes from about $170 to $183.  If the price ends up at any price within this range, there should be a profit.  Historically, the stock has fluctuated by an average of about $2, which would place it between $173 and $177.

If the historical fluctuation continues, these positions could deliver 60% or more on investment for a single week of waiting it out.

If the stock fluctuates more than we expect (and finishes outside of the break-even range), we would roll over the expiring options before they expire on May 4 and sell new weekly out-of-the-money options for the 11May18 series, and continue doing so until we took in sufficient new premium to make the entire experience a profitable one.  We would have five weekly opportunities to accomplish this.  Of course, nothing is guaranteed, but weekly fluctuations tend to be much more moderate once the earnings week has passed, and that is the kind of market where this kind of diagonal or calendar spreads do their best.

If the stock fluctuates more than $2.50 from the $166.36 price when we placed the spreads, you might want to adjust the strike prices by $2.50 in the same direction.

Final note: MA has been a good underlying for Terry’s Tips.  In 2017, one of our actual portfolios traded MA options, and the portfolio gained 152% for the year. You can get a full (and free) report on how this worked out by requesting it below.

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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.

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