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Associate Option Battle 9.27.2012

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Associate Jim’s Trade

Trade: Selling 15 WAG Oct 37-38 Call Spread for $0.35

Risk: $65.00 per 1 lot

Reward: $35.00 per 1 lot

Breakeven: $37.35

Notes: The stock has sold off the last 3 times after earnings and I don’t think it will break its 52 week high of 36.85

Associate Alex’s Trade

Trade: Buying Weekly AAPL 685-695-700 broken wing Call fly for $1.15

Risk: $115 per 1 lot

Reward: $885 per 1 lot

Breakeven: $686.15

Notes: I like this trade because when Apple makes big moves, it generally follow the same trend for a day or two after as we saw with this dip. I only need Apple to move up a third of the price it moved today to break even and if Apple explodes upwards past the upper wing of the butterfly, I will still make money, though less than if it stops at the body.

Alex has a master’s degree in economics from Suffolk U.

Jim has a BS in Finance from UIUC.



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Earnings Play of the Day FINL 9.27.2012

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Out of the last 4 earnings reports the stock rallied twice and sold off twice. The near term at the money straddle is indicating a move of around $2.35 (10.9%). The stock has moved on average 11.3% on earnings over the past 4 quarters  This gives us an upside measure move target of $25.05 and a downside target of $20.35. 

Trade: Buying the Oct 22.5 Straddle for $2.35

Risk: $235 per 1 lot

Reward: Unlimited

Notes: The straddle is implying a move of 10.90% but the stock moves on average 11.30% after earnings.


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Pregame the Harvest Moon with a Little History 9.27.2012

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Below is a series of charts that display the trading day on or before the harvest moon. The 2008 harvest moon indicated a reversal in a channel, as it came to test the lower end, bounce, and then set up for a perfect sell into a 30% decline in the S&P 500 E-mini future. The 2009 harvest moon confirmed a textbook trend-line; which from the anchor point lead to many higher lows. In 2010, it was a strong confirmation candle, overtaking the prior day’s high, into a strong trending market with little pullback. And finally the last harvest moon, in 2011, was in a consolidation pattern bottom, during the USA debt downgrade fiasco last summer, but did serve a significant low, both in line with others and at horizontal support, reversing price up and throwing it 6% higher within a few days.

It is obvious that this is a significant event in technical analysis, but it is vital to be aware with current patterns prevailing in the chart.

E-mail the author with any comments, questions, or any inquiry

mark@keeneonthemarket.com



HarvestFinal

 

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Morning Rage 9.27.2012

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Continue to watch developments in Europe and expect violent protests to continue while unemployment remains unstable in Southern European countries. For now, markets are showing a positive consensus on data with all US indices futures up around the 0.40% mark. Crude oil futures are up 0.89 and metals futures are positive. Gold futures gained 4.60, silver gained 0.2, and platinum gained 10.10 points.

Nike (NKE) and RIM (RIMM) will be releasing earnings reports before the market opens this morning. I expect RIMM to have a negative earnings report, as the company reports it will continue to show signs of weakness in the near future, but they may bounce back on any positive subscriber gains or hopes that the BlackBerry 10 could become a top phone in the market. Analysts are expecting that Nikes sales grew by $35 million, but that profit will decline $0.24 a share to $1.12.

Keep track of the associate daily trade pick on the blog.

Alex Kalish has a master’s degree in economics from Suffolk U.