I love it when stocks have earnings. The Implied Volatilities go way up along with the option premiums!
And I like to make money quick which we can do since IV drops like a rock following earnings!!!
We can always take a closer look at the companies with earnings and do some research prior to their announcement to get an edge and understand how the stock price may move once earnings are announced so that we can bank those quick profits.
There are 3 great companies that announce earnings next week and I have 3 option trades that can make us some nice money………….
In today’s video discuss:
- Review the businesses of ACN, FDX, and MU and look at their outlook this week when they announce earnings?
- Are the stock prices going to drop like a rock, skyrocket up or stay within a range after the earnings announcements?
- What are the best earnings option trades in these companies and how do we place the trades on the option trading platform?
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Hey guys, Darren here. We have a video for you here today.
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DISCLAIMER, I am not a financial planner and I am not recommending trades. Please do your own research and if you are new or learning options, I recommend you start small.
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What is the outlook for ACN, FDX, and MU this week when they announce earnings?
We will go one by one.
Keithen Drury from the Motley Fool wrote and article and talked about 3 AI stocks to buy right now hand over fist. Accenture was one of them.
Accenture is a company that kind of flies under the radar. Most people have not heard of them and don’t know what they do. However they employ over 700,000 people and are the 4th largest global employer in the world.
Accenture is a consulting company and can assist companies with identifying data and implementing AI to further grow their business.
Accenture should continue to see growth as their customers begin to implement AI more and more and the economic outlook continues to improve. This will allow companies to invest in the tools that ACN helps to provide.
Their income statement shows great YOY revenue growth.
And the Balance sheet is super clean with Assets growing while keeping liabilities low.
Yahoo Finance has the short term and long term outlook for ACN heading upward.
However, the stock price is at 52 week highs and fairly valued right at the 1 yr target of 346/347 according to Yahoo. My target is slightly higher at 380.
Last time on 9/28 ACN beat earnings but guided lower and dropped 15 and moved up 8 day after.
This time I will look to place an Iron Condor option trade just prior to earnings in ACN.
How do we sell an Iron Condor in ACN on the option trading platform?
We are using the Tastytrade option trading platform. You can do this on any option trading platform.
However, Tastytrade is one of the best and most intuitive for trading options.
These are the guys that developed the TOS Think or Swim Option trading platform and then sold it to TD Ameritrade. TD and Schwab use that platform still to this day.
Tastytrade is even better.
Use the link below and you can get cash back when you open an account. You can open an account with any amount. However, I do recommend that you open with around five thousand dollars so that you can place several different trades.
Punch in ACN in the upper left while on the trade page and the option chains will pop up.
We see that ACN is currently trading at $646 and the IVR Implied Volatility Rating is good at 23. This means that the option prices are high and it is due to the fact that it is just prior to the earnings release. Volatility is high because the price is more likely to make a larger move than typical.
After earnings volatility will drop so we want to sell options in the current high volatility environment. And then hopefully buy them back for less $’s after the earnings event.
Let’s click and open the Dec 22nd chain since it is the nearest option chain following earnings.
Click on the Bid to SELL the 330 Put option and Ask to buy the 320 option. We collect $1.10 for selling this option which is really $110 since 1 option contract controls 100 shares of stock.
Now on the Call side click the Bid to sell the 360 Call and Ask to buy the 370 Call option. We collect $150 for selling this Call Vertical. So in total we collect $260.
Now if we click on the Curve mode while still on the trade page we can visually see the profit zone in Green.
As long as we stay above the $330 PUT strike price and below the $360 Call at expiration, we keep the full $260 that is placed in our account as soon as we hit review and send to place the trade.
We hit review and send and place the trade.
What is the outlook for FDX this week when they announce earnings?
FDX is another one that is near its upper range but has a little room to move to the upside. The Yahoo Finance short term and long term outlook is very good. It likely has a little room to move to the upside but not significant.
In September, FDX reported revenue that dropped 9% YOY but operating income increased and the stock jumped.
That could be the case next week as well.
Zacks talks about their Express unit performance expected to be down and operation cuts to help the bottom line operating expenses.
The fundamentals are great for FDX. Since it is at highs I expect it not to rocket up and due to being such a solid company I doubt it will drop too much either.
So I am looking at another Iron Condor for FDX.
Now with FDX I am just going to jump straight the Curve mode page as it is set up exactly like the ACN trade.
We are selling the 255-265 Put Vertical and and 295-305 Call vertical and collecting $270 as soon as we hit review and send and place the trade.
As long as the stock price stays above the $265 short Put and $295 short Call options prior to expiration we keep the entire $270. All in just a few days!
Notice that both the Put and Call verticals are $10 wide. Since are collecting $270 for placing this trade the max we can lose is the $10 – minus $2.70 or $730. We can only lose on one side. So one side will be a full winner no matter what.
The last one we will look at right now is MU.
What is the outlook for MU this week when they announce earnings?
Micron is currently priced at $81 and has a good short and long term outlook. Just like FDX and ACN it is near its 52 week high though.
It just had a recent breakout in the last month. Prices for DRAM and NAND memory chips have risen in the 4th quarter and they are expected to continue to rise by another 10% in the first quarter.
UBS recently upgraded Micron’s target to $90 from 76 due to the strong DRAM and NAND pricing. Zacks expects Micron to lose $1 per share but top line growth and revenue is expected to rise.
So I like MU moving ahead but still want to trade both sides since it is already at 52 week highs. So it shouldn’t sky rocket that much higher even if it beats which is expected.
For this reason I’ll stick with the Iron Condor.
I am going to sell the $5 wide 73-78 Put spread and 85-90 Call spread to collect $150.
Now if for some reason on any of these plays the stock prices move outside our range, then we can close and recenter in the next month options and collect more premium.
Last thing guys……..wait to place this trade just before the close on Mon for ACN and Tues for FED and Wed for MU. That way you will be able to make sure that you are in the best position and you can center your strikes.
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Alright guys, if you are a beginner and this sounded confusing do not worry. It did for me as well originally. We will be continuing to cover the details in future videos. We will continue to learn and succeed together.
I’ve put a link down below for the FREE Options Workshop. Be sure to grab that.
Remember to hit like and subscribe and leave a comment below with any questions and I’ll be sure to respond. Let me know what you are trading today and having success with.
Thanks for watching please share this video with a friend and see you in the next one!