How We Got Short Solar City Corp (SCTY)

SolarCity Corporation (SCTY) is a renewable energy company based in California. The company’s stock is currently trading around $29.77 in today’s session and is lower by nearly 22% on the day. The stock has had absolutely dismal performance this year falling nearly 45% year to date. The stock is lower today on quarterly earnings and our head catalyst trader was short ahead of earnings. Here’s how he set up his trade and knew to get short.

SCTY had a bearish historical earnings performance record having sold off 7 of the past 10 quarters with an average move of 7.67%. The chart was also showing bearish patterns going into the release of earnings. The stock was trading well below the Ichimoku Cloud and was also below both of its major moving averages. The cloud was also aggressively sloping lower going into the report. AlphaShark’s AlphaTracker indicator was also showing institutional money positioned net short ahead of the report. With those factors in mind it appeared that SCTY was setting up well for a short.

Using the options market our trader calculated an implied move of $4.25 by today’s close in SCTY. Using this measure a downside target of $33.95 was calculated and an options spread was selected

Trade: Bought the SCTY Oct 30th Weekly 36-34 Put Spreads for $0.55
Risk: $55 per 1 lot
Reward: $145 per 1 lot
Breakeven: $35.45

As the stock gapped lower this morning and continued to sell off our trader was able to exit this spread for $1.98 more than tripling his money overnight.

Is MasterCard Incorporated (MA) Set to Rally on Earnings?

MasterCard Incorporated (MA) is a global transaction and payments company with operations around the world. The company’s stock is currently trading around $99.90 in a 52 week range of $74.47-$99.93. The stock has been performing relatively well this year with shares rallying nearly 15.7% year to date. MA is set to report earnings tomorrow morning and early indications point to a possible rally on earnings day.

MA has rallied 8 of the past 12 quarters with an average move of 3.24%. The stock is also higher 10 of the past 12 quarters form earnings day to expiry. The stock is also looking very strong on the Ichimoku Cloud with shares trading well above the Ichimoku cloud and the stock is just off of 52 week highs. With both historical movement trands and the chart showing bullish patterns I want to be long MA into earnings.

The options market is implying a move of around $3.20 I want to calculate an upside target and set up an options trade. Using this implied move I will set up a trade with a target of $103.10.

Trade: Buying the MA Oct 30th Weekly 101-103 Call Spreads for $0.60
Risk: $60 per 1 lot
Reward: $140 per 1 lot
Breakeven: $101.60

This trade goes to max value if the stock moved to the measured move target and also offers a trader a reward to risk ratio of better than 2-1.

Comcast Corporation (CMCSA) Earnings Preview

Comcast Corporation (CMCSA) is a media company operating a wide range of communications and broadcasting businesses. The company’s stock is currently trading around $62.00 in a 52 week range of $50.01-$64.99. CMCSA is set to report their most recent quarterly earnings tomorrow morning before the market open. Based on the price action and historical earnings record in CMCSA I think it is setting up well for a bullish options play ahead of the report.

CMCSA has rallied 9 of the past 12 quarters on earnings day with an average move of 2.85%. The stock is also higher 9 of 12 times from earnings day to expiry. The stock is also setting up well on a chart. The stock is trading well above the Ichimoku Cloud and has been in bullish territory since breaking higher earlier this month. The stock is moderately higher today but with shares trading well above the cloud and the historical movement record showing a clear bullish patter I would want to get long CMCSA via weekly options.
Using the options market we can calculate an implied move of $2.30 by Friday’s close. With stock at current levels that would give me an upside target of $64.30 by Friday. Using this level I will set up an options spread.

Trade: Buying the CMCSA Oct 30th Weekly 63-64 Call Spreads for $0.30
Risk: $30 per 1 lot
Reward: $70 per 1 lot
Breakeven: $63.30

With this trade I have a better than 2-1 reward to risk ratio and a max profit if the stock trades to the calculated measured move target.

How We Traded AXP for Earnings

American Express Company (AXP) is a global consumer credit card and merchant services company. The company’s stock is trading around $72.10 in today’s session, falling over 5.75% after the company released earnings after the bell yesterday. The stock is lower by more than $4.40 and has traded as low as $71.40 this morning as the firm missed analyst estimates on both EPS and revenues. The firm reported earnings of $1.24/share against estimates of $1.30/share and revenues of $8.2 billion vs. estimates of $8.38 billion. After such dismal numbers short sellers in AXP are celebrating this morning. Our traders caught this move to the downside by establishing a short position ahead of earnings in AXP here’s how they did it.

AXP had a very disappointing track record on earnings day over the past 12 quarters so our expectations were for the stock to be under pressure after this release. In the past 12 releases the stock had sold off 8 times from earnings day to options expiration with an average move of 3.26%. Ahead of the release market makers were implying a move of around $2.30 from the stocks pre-earnings price of $76.75 through the end of the week. Technically AXP was looking rather weak on a chart as well. The stock was trading inside of the Ichimoku Cloud but had failed to break old upside resistance into the report. With a bearish historical track record and a neutral chart our trader wanted to get short AXP into earnings.
Using the implied move of $2.30 a downside target for Friday’s close of $74.45 was calculated and an options spreads was selected.

Our trader bought the AXP Oct 23rd Weekly 75.5-74.5 Put Spreads for $0.28
Risk: $28 per 1 lot
Reward: $72 per 1 lot
Breakeven: $75.22

On the open this morning our trader was able to exit these spreads for $0.96 more than tripling his money overnight. This is a perfect example of how a thoughtful analysis ahead of earnings can lead to huge winners.

Does Deere & Co (DE) Weak Historical Performance Mean it’s a Good Short?

Deere & Co (DE) is a manufacturer of heavy machinery and vehicles for agricultural, forestry and construction applications. The stock is currently trading around $91.20 in a 52 week range of $78.88-$98.23. DE has performed relatively well this year with shares rallying 3.2% year to date. Despite the stocks relatively strong performance this year its chart and historical performance record are indicating it might be a good short ahead of earnings before the bell tomorrow.

DE is set to report earnings tomorrow before the opening bell and the stock record on earnings day is extremely bearish. Over the past 12 quarters the stock sold off on earnings day 9 times with an average move of 2.64%. Currently the options market is implying a move of around $3.00 (3.3% ) higher or lower by tomorrow’s close. The stock is selling off today and is now below the Ichimoku Cloud on the daily bar. With a weakened chart setups and a dismal performance record DE is appearing to set up well for a short.

Using the implied move I can calculate a downside target for DE by tomorrow’s close. I will look to set up an options strategy targeting a move to $88.20 by tomorrow’s close. With this target in place I can now set up an options trade.

Possible Trade: Buying the DE Aug 90-88 Put Spreads for $0.50
Risk: $50 per 1 lot
Reward: $150 per 1 lot
Breakeven: $89.50

Salesforce.com Inc. (CRM) Looking Weak Ahead of Earnings Tomorrow

Salesforce.com Inc. (CRM) is a cloud computing service that provides customers with customer relationship management platforms. The company’s stock is currently trading around $69.70 in a 52 week range of $51.04-$78.46. The stock has been performing well this year with shares rallying 17.64% year to date. Despite the stocks relatively strong performance through the year CRM is selling off hard ahead of earnings set to be released after the bell today.

The stock has a mixed performance record on earnings. Over the past 12 quarters the stock has rallied 6 times and sold off 6 times with an average move of 6.95%. With stock at current levels options markets are implying that the stock can move higher or lower by $5.35 by tomorrow’s expiration. Although the historical performance of the stock is mixed the chart is starting to look much weaker in CRM. The stock is lower by nearly 3.5% today and is breaking out of value for the month. The stock is now also firmly below the Ichimoku Cloud indicating a move into bearish territory. With a mixed performance history and a weak chat I believe CRM is setting up well for a short position via options.

Using the move implied by the options market I can calculate a downside target of $64.35. I can use the downside target to set up a trade.

Possible trade: Buying the CRM Aug 66-64 Put Spreads for $0.50
Risk: $50 per 1 lot
Reward: $150 per 1 lot
Breakeven: $65.50

Traders Making Big Bearish Bets in Xilinx, Inc (XLNX)

Xilinx, Inc (XLNX) is a semiconductor and technology company that develops programmable devices. The company’s stock is currently trading around $42.50 in a 52 week range of $36.24-$48.73. The stock has been relatively weak on the year with shares falling 2.17% year to date. The stock has been on a bit of a rebound however with shares rallying after making recent lows post-earnings. Despite the slight recovery in XLNX options traders are putting on some large bearish bets in the name during todays session.

Earlier this morning a trader bought 8,124 XLNX Sep 40 puts for $0.44 while the stock was trading at $42.74. The stock sold off after the order hit and over 20,000 contracts have now traded on that line. The stock moved to session lows after the order hit the tape and as the stock made lows these puts traded as high as $0.60 on the session making this a very profitable trade. Although the stock is off of session lows these puts are still trading near the trader’s entry price. The stock is below the Ichimoku Cloud on the daily bar so this could still represent a decent short opportunity.

Trade: A trader bought 8,124 XLNX Sep 40 puts for $0.44
Risk: $44 per 1 lot
Breakeven: $39.56

I bought these puts for $0.48 on average and took a profit target at $0.60. Including the other blocks that traded on this line XLNX has traded 4.5 times its average daily options volume today meaning this order is very significant.

Lowe’s Companies (LOW) Set to Report Earnings Tomorrow Before the Opening Bell

Lowe’s Companies, Inc (LOW) is a home improvement retailer with over 1,800 locations in North America. The company’s stock is currently trading around $73.22 in a 52 week range of $49.70-$76.25. The stock is seeing a nice move higher today in sympathy with the move higher in Home Depot (HD) after earnings were reported earlier today. LOW has been relatively strong this year with shares rallying just over 6% year to date. The company is set to report their most recent quarterly earnings tomorrow morning before the bell. Based on the strong historical performance of the stock and the solid technical setup it seems like LOW is setting up well for a long ahead of earnings.

LOW stock has rallied on earnings day 7 of the past 12 quarters with an average move of 4.23%. More importantly, the stock has rallied from earnings day through the nearest options expiration with an average move of 4.64%. The stock is also looking strong on a chart. LOW is trading well above the Ichimoku Cloud and both its 9 and 26 period moving averages. With such strong historical movement and a good looking chart I want to set up a long position in LOW. Market makers are currently implying a move of around $2.70 in LOW by this Friday’s expiration so I can use this to calculate an upside target.

With LOW trading around $73.22 I will calculate an upside target of $75.92 and set up a trade.

Possible Trade: Selling the LOW Aug 75-72.5 Put Spreads for $1.40
Risk: $110 per 1 lot
Reward: $140 per 1 lot
Breakeven: $73.60

Home Depot (HD) Earnings Preview

Home Depot (HD) is a retailer of home improvement products and services with operations in North America and U.S. territories. The company operates nearly 2,300 stores in those regions. Home Depot’s stock is currently trading around $120.40 in a 52 week range of $82.85-$120.75. The stock has been strong this year, rallying 14.67% year to date. Home Depot is set to report their most recent quarterly earnings tomorrow before the market open and all data points are signaling for a potential bullish trade signal ahead of the report.

HD has rallied 9 of the past 12 quarters on earnings day with an average move of 3.28%. The stock has also rallied from earnings day through the nearest options expiration 9 of the past 12 quarters. The stock is also looking very strong on a chart. Currently HD shares are trading well above the Ichimoku Cloud and both the 9 and 26 period moving averages. With the options market implying a move of around $4.10 by this Fridays close I can look for an options spread that gets me long HD with a maximum profit at the implied upside target of $124.50.

Possible Trade: Buying the HD Aug 123-125 Call Spreads for $0.50
Risk: $50 per 1 lot
Reward: $150 per 1 lot
Breakeven: $123.50

Traders Betting Big on Tumi Holdings (TUMI) Using Options

Tumi Holdings, Inc. (TUMI) offers consumers a range of travel and business products and accessories. The company’s stock is currently trading around $20.70 in a 52 week range of $18.29-$25.47. The stock has been underperforming the market this year falling 12.77% year to date. The past 5 days have seen a bit of a rebound in shares however. The stock has rallied over 4.2% over the past 5 days and is seeing another pop today of 2.32%. Despite the more bearish longer term price action in TUMI, options traders are betting on a continued move higher through the end of the year.

Earlier today a trader bought 1,933 of the TUMI Nov 22.5 Calls for $0.90 when the stock was trading at $20.57. The stock rallied after the order hit the tape and this block represents orderflow 8.6 times the average daily options volume in TUMI. Nearly 2,500 contracts have traded on that line now and stock has traded as high as $20.72 on the session. These options have not managed to trade higher on the day but this is very unusual options activity in TUMI. This will now create the largest line of open interest in TUMI Nov options and this trader is likely expecting the stock to continue its recovery after rallying on earnings earlier this month. With options still trading at $0.90 this trade could represent an opportunity to get long TUMI on institutional orderflow.

Trade: A trader bought 1,933 TUMI Nov 22.5 Calls for $0.90
Risk: $90 per 1 lot
Reward: Unlimited
Breakeven: $23.40