Rocket Equities & Options August 17, 2020
Retail Earnings in Focus this Week
With the S&P flirting with all time highs, and the presidential election just 78 days away, retail stocks take center stage this week with a plethora of companies reporting.
WMT, TGT, LOW, HD, KSS, TJX, LB, and FL are just some of the companies reporting their numbers over the next 4 days. NVDA is out with their numbers Wednesday as well.
We will be scouring all of these stocks as we approach their numbers this week. The stocks releasing their numbers this week, especially the larger ones who have performed well over the last 6 months, are all trading dramatically higher this morning as traders look to get in ahead of their announcement.
Often times, when a stock trades dramatically higher into earnings, much of the anticipation might already be priced in, and even with good numbers the stock can give back some of those recent gains.
Tuesday before the bell: Advanced Auto Parts (AAP). Home Depot (HD), Kohls (KSS), Walmart (WMT).
WMT is pricing in a $5.70 move on their earnings tomorrow morning. KSS is pricing in a $2.23 move. HD is pricing in a $8.54 move. AAP is pricing in $10.98 move.
Wednesday before the bell: Lowe's (LOW), Target (TGT). TJX Companies (TJX).
Wednesday after the bell: L Brands (LB), Nvidia (NVDA).
Thursday before the bell: Estee Lauder (EL), BJs Wholesale Club (BJ).
Thursday after the bell: Foot Locker (FL), Deere (DE).
As of about 2pm ET on Monday, WMT is up 2.5%, TGT is up 1.2%, LOW is up 2.5%, HD is up 2.95%, BJ is up 3.04%, TJX is up 2.6%, and LB is up 8.6%.
Our LYFT option trade worked out well last week. The stock traded lower as we expected and we profited $26 per contract pair with $74 at risk for a 35.13% profit.
Our option trades have started off nicely going 3 for 3. This will not always be the case, so keep your risk levels appropriate. Occasionally when we make trades like we did with LYFT last week, the stock will trade above our price range for a max loss, and you must be aware that almost 1/4 times we make this trade you will lose the entire 100% of capital you put at risk.
Often times, it's very easy to understand that all of your principal is at risk when purchasing something like an out of the money call, when you are risking a very small amount for hopefully a very large return. On the other hand, our brains have a way of convincing ourselves that high probability events will almost always come true.
Just because a trade has a 75% chance of success, you must realize that if we make this trade 4 times a week, you will on average end up with about 52 losing trades a year. and 156 winners. Make sure you're prepared to possibly lose the entire investment you make in some of these options trades, especially if they are geared around expected earnings when volatility higher than usual, even if our chances of profiting are much greater than our chances of losing.
I was considering entering a trade to absorb some of the premium in WMT for earnings tomorrow, but I would have a bearish bias after WMT has just traded from $118 to $136 since July 6th, but this would be a similar trade to LYFT and I'm just not comfortable having a bearish bias in WMT when they could come out with huge numbers, and the optimism around their new Walmart+ service which will be a competitor for Amazon Prime and cost $98/year and will include same day delivery groceries, gas discounts, and other perks. So, we will wait for now.
Stay tuned for more updates this week with charts and videos!
Current positions:
Long Term portfolio:
Long half a position in DIS at $118.63. Disney is trading at $129.54 Stop is $98.45.
Long half position in UBER at $31.50 or better. Uber is trading at $29.58. Stop is $26.24.
Long half position in STZ at $180.50. STZ is trading at $174.73. Stop is $164.05.
Short Term portfolio:
LYFT credit spread expired for a profit of $26 for a 35.13% profit per contract pair.
WMT, TGT, LOW, HD, KSS, TJX, LB, and FL are just some of the companies reporting their numbers over the next 4 days. NVDA is out with their numbers Wednesday as well.
We will be scouring all of these stocks as we approach their numbers this week. The stocks releasing their numbers this week, especially the larger ones who have performed well over the last 6 months, are all trading dramatically higher this morning as traders look to get in ahead of their announcement.
Often times, when a stock trades dramatically higher into earnings, much of the anticipation might already be priced in, and even with good numbers the stock can give back some of those recent gains.
Tuesday before the bell: Advanced Auto Parts (AAP). Home Depot (HD), Kohls (KSS), Walmart (WMT).
WMT is pricing in a $5.70 move on their earnings tomorrow morning. KSS is pricing in a $2.23 move. HD is pricing in a $8.54 move. AAP is pricing in $10.98 move.
Wednesday before the bell: Lowe's (LOW), Target (TGT). TJX Companies (TJX).
Wednesday after the bell: L Brands (LB), Nvidia (NVDA).
Thursday before the bell: Estee Lauder (EL), BJs Wholesale Club (BJ).
Thursday after the bell: Foot Locker (FL), Deere (DE).
As of about 2pm ET on Monday, WMT is up 2.5%, TGT is up 1.2%, LOW is up 2.5%, HD is up 2.95%, BJ is up 3.04%, TJX is up 2.6%, and LB is up 8.6%.
Our LYFT option trade worked out well last week. The stock traded lower as we expected and we profited $26 per contract pair with $74 at risk for a 35.13% profit.
Our option trades have started off nicely going 3 for 3. This will not always be the case, so keep your risk levels appropriate. Occasionally when we make trades like we did with LYFT last week, the stock will trade above our price range for a max loss, and you must be aware that almost 1/4 times we make this trade you will lose the entire 100% of capital you put at risk.
Often times, it's very easy to understand that all of your principal is at risk when purchasing something like an out of the money call, when you are risking a very small amount for hopefully a very large return. On the other hand, our brains have a way of convincing ourselves that high probability events will almost always come true.
Just because a trade has a 75% chance of success, you must realize that if we make this trade 4 times a week, you will on average end up with about 52 losing trades a year. and 156 winners. Make sure you're prepared to possibly lose the entire investment you make in some of these options trades, especially if they are geared around expected earnings when volatility higher than usual, even if our chances of profiting are much greater than our chances of losing.
I was considering entering a trade to absorb some of the premium in WMT for earnings tomorrow, but I would have a bearish bias after WMT has just traded from $118 to $136 since July 6th, but this would be a similar trade to LYFT and I'm just not comfortable having a bearish bias in WMT when they could come out with huge numbers, and the optimism around their new Walmart+ service which will be a competitor for Amazon Prime and cost $98/year and will include same day delivery groceries, gas discounts, and other perks. So, we will wait for now.
Stay tuned for more updates this week with charts and videos!
Current positions:
Long Term portfolio:
Long half a position in DIS at $118.63. Disney is trading at $129.54 Stop is $98.45.
Long half position in UBER at $31.50 or better. Uber is trading at $29.58. Stop is $26.24.
Long half position in STZ at $180.50. STZ is trading at $174.73. Stop is $164.05.
Short Term portfolio:
LYFT credit spread expired for a profit of $26 for a 35.13% profit per contract pair.
Disney
Disney is pulling back a bit today but is still trading relatively well given the recent run it had following its earnings release.
Uber
Uber has given back all of its gains that it had leading up to its earnings. This is a critical level of support where it's at right now, as it's resting just above its .382 retracement. We will keep our eye on Uber to see how it trades at this level.
Constellation Brands
STZ has bounced nicely off of its 23.6% retracement from its move higher.
Gold
Gold is nearing $2000 once again, as it charges higher today following the 13-F filing over the weekend that shows Warren Buffet took a substantial position in Barrick Gold.
TSLA
TSLA has traded to another all time high today after an upgrade from Wedbush raised their target to $1900.
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