Skip to main content

Limiting Risk to Kick Off Earnings Season

Earnings season is upon us and Brian has a safe play to limit your risk in the Options Market. Last Friday on CNBC, Brian took a look at replacing a stock. He feels YUM! is a good play here because it has seen plus or minus 5% moves post earnings for the last 4 quarters. The play here is to sell the Aug. 38 put and with those profits buy the Aug. 42 call. Here you collect 30 cents on the trade. You will profit if YUM! gaps above $42. If YUM! is below 38 you will be put to it and have to own the stock there, but Brian feels very comfortable in doing that because he feels $38 is a good area to get in.

Brian's Play on YUM!

Comments

Post a Comment

Popular posts from this blog

Is the KCJ Foreshadowing a 2008 Repeat?

The CBOE Correlation Index (KCJ) is close to the lowest level we have seen since it was first listed in 2007. The KCJ measures the implied movement of the S&P 500 components options, compared to the implied movement of the S&P 500 index options. Simply put, the higher the number, the more likely all stocks are going to move together. Conversely, a low number will be characterized by sector rotation, and flat markets; one sector moves higher, another moves lower.  (Source: Access Hollywood) Correlation, for lack of a better term, is correlated with volatility. Not surprisingly, 30-day S&P 500 historical volatility is near the low level of 6.5%. Currently at 33.5, KCJ is sitting close to rock bottom, lower than where it was in 2007, (but not lower than where Lindsay Lohan was in 2007).  So far this year, the market has been able to grind higher, characterized by leadership in FANG(Facebook Apple/Amazon, Netflix, Google) and sector rotation. A...
Post a Comment
Read more

Heading into Summer

With the dog days of summer almost upon us, it's time to start thinking about option strategies. Most of the time, the summer is when markets are calm. However, this may not necessarily be the case for options. Playing both sides, options give you an edge as you decide where you think the market may be. On Options Action, the panel had many interesting topics on their plates. As volatility continues the shrink, the fear in the market is slowly deteriorating. However, this may not mean a jump is coming. There is still a lot of uncertainty out there. Putting this all in prospective click below to hear all the newest option strategies. http://www.cnbc.com/id/15840232?video=1131628744&play=1 http://www.cnbc.com/id/15840232?video=1131630253&play=1 http://www.cnbc.com/id/15840232?video=1131628723&play=1 http://www.cnbc.com/id/15840232?video=1131628711&play=1
1 comment
Read more