The Green Mountain Coffee Roasters (GMCR) spread I recommended last week resulted in a 20% gain. Not bad considering we were blindsided by their announcing a new 5-year deal with Starbucks that shot the stock 25% higher while we were betting on a lower post-announcement price. Our gain was not as great as last week’s 50% gain on Apple, but we will take 20% anytime (I’m sorry, but I executed the Apple spreads in a Terry’s Tips portfolio and did not share it with the free newsletter subscribers).
This week I have two earnings-related plays which need to be made before the close on Wednesday if you want to participate.
If you read down further, there is information on how you can become a Terry’s Tips Insider absolutely free!
Two Earnings Play for This Week – Deere and Sina
Sina Corporation (SINA) is pretty much the same as Yahoo but operates in China. I have written a Seeking Alpha article about the company – How To Play The Sina Corporation Earnings Ann… in which I explain why I believe that the stock will probably dip a bit after Wednesday’s announcement (largely because expectations are high, the current valuation is pricey, and hedge funds are selling shares).
I recommended these trades to play the SINA announcement with the stock at about $59:
BTO 10 SINA Jun-13 55 puts (SINA130622P55)
STO 10 SINA May-13 55 puts (SINA130518P55) for a debit of $1.01 (buying a calendar)
BTO 10 SINA Jun-13 57.5 puts (SINA130622P57.5)
STO 10 SINA May-13 57.5 puts (SINA130518P57.5) for a debit of $1.11 (buying a calendar)
BTO 10 SINA Jun-13 60 calls (SINA130622C60)
STO 10 SINA May-13 60 calls (SINA130518C60) for a debit of $1.18 (buying a calendar)
These trades should make a gain if the stock goes up by less than 5% or down by less than 10% by Friday at the close.
The other earnings play involves Deere & Co. (DE) which has the unenviable record of falling four straight quarters after announcing, even when they bested expectations. I have also written a Seeking Alpha article on this play – How To Play the Deere & Company Earnings Announcement.
Expectations are high here, too, and I expect a lower price than the current $93 after earnings. Here are the spreads I am making in Deere:
Buy To Open 10 DE Jun-13 95 puts (DE130622P95)
Sell To Open 10 DE May-13 92.5 puts (DE130518P92.5) for a debit of $2.35 (buying a diagonal)
Buy to Open 5 DE Jun-13 90 puts (DE130622P90)
Sell to Open 5 DE May-13 90 puts (DE130518P90) for a debit of $.90 (buying a calendar)
These spreads will do well if the stock falls but start to lose money if the stock moves more than $2 higher.
Please check both Seeking Alpha articles for my complete reasoning for these spreads as well as a risk profile graph for each.