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Pre-Earnings Options Trades: 09_18_18

Published 09/18/2018, 12:40 AM
Updated 07/09/2023, 06:31 AM

First up is Bed Bath & Beyond (NASDAQ:BBBY) (earnings 9/26 after close). This has been a relatively dismal stock in last few years, as retail decay continues. We can see that earnings reports have likewise started to languish in the last few years.

Bed Bath & Beyond

So, a bearish play may be of use. Here I use my “Super Bear” option spread. All 14 days to expiry, I put in a 35 delta long put with a 70-35 delta call credit spread (SELL the 70 delta, BUY the 35 delta).
Slopecharts show again, a downward bias to the prices as they approach earnings:

Bed Bath & Beyond

If we proceed with a Super Bear spread, starting 4 days before earnings and close 1 days after we get the following backtest results:

Bed Bath & Beyond

Courtesy cmlviz.com

For our second trade we again return to a neutral disposition, to the 45 delta double calendar. This consists of shorting the 45 delta put AND the 45 delta call, with 9 day expiration and going long the 45 delta put and 45 delta call with 23 days to expiry.

Let’s look at Costco (NASDAQ:COST) (Earnings 10/4, post close).

Costco

Let’s look at the double calendar between 13 days prior to and 2 days prior to expiry from last 2 yrs:

Costco

Next, let’s look at Delta Air Lines (NYSE:DAL) (DAL, Earnings date 10/11/18 before open)

Delta Air Lines

Relatively flat between day 8 and earnings, with some increase near the actual earnings date. The amplitude of earnings reactions is muted.

Delta Air Lines

What does a double calendar look like between day 8 and 0 (through earnings)?

Delta Air Lines

Now let’s look at JPMorgan Chase & Co. (NYSE:JPM), (earnings 10/12, before open)

JPMorgan Chase

Here we apply a double calendar between days 10 and the earnings date.

JPMorgan Chase

The amplitude of movement is small.

JPMorgan Chase

Now let’s look at PepsiCo (NASDAQ:PEP) (earnings 10/2 before open)

PepsiCo

Here we use the “Full Mullet” trade, short in the front, long in the back.
Meaning: a straddle buying the 50 delta call and 50 delta put 45 days out, and selling the 20 delta call and put 20 days out.

If we look at the Full Mullet starting 14 days before, and ending 2 days after:

PepsiCo

Courtesy cmlviz.com

Last we’ll look at Walgreens Boots Alliance (NASDAQ:WBA) (WBA, earnings on 10/11 before market open)

Walgreens Boots Alliance

Let’s again turn to the double calendar. Again we will open the trade at day 6 before earnings, and take the trade through earnings.

Walgreens Boots Alliance

A little riskier because the last earnings change was very negative. However overall, low amplitude which is borne out by backtesting.

Walgreens Boots Alliance

Courtesy cmlviz.com

Again these are simply trade ideas, no guarantees here, but there is an exceptional edge with using Slope Charts pre-earnings price charts and Earnings Reactions bar graphs.

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