Blue Horseshoe Loves This Finance Blog

If ever there was an opportunity for a stock to rip following an earnings announcement, it's Twitter. It's not news that the ubiquitous social media site's stock has been ravished by bearish bets pretty much since its debut back in 2013.  A history of management infighting and an inability to produce steady profits has set the bar very low for today's after the bell announcement.  Right now, the stock is trading for about $31 a share... well off its all time high - just under $70 - and still well below its 1 year high of $53.49. This is great news from a trading perspective.  The company finally has a lone voice in charge in Jack Dorsey and anything that even closely resembles good news in today's announcement could change investor sentiment send the stock soaring. The play is a classic call ratio backspread: Short 1 November 6th $32 Call for $1.69 Long 3 November 6th $35 Calls for $0.71 This setup gives you positive 30 delta points, has an upside break-even price o...

We're officially in earnings season and here are two opportunities that stick out to me for tomorrow... Both of these names are large caps so I don't like super aggressive strategies like ratio backspreads. Bearish Biogen (BIIB): Long 41 shares at $265.81 Long 1 November $265 put at $14.90 Long 1 November $255 put at $10.60 Long 1 November $245 put at $7.20 Anytime you're trading options with elevated levels of implied volatility it will be difficult to get a lot of convexity and this trade maxes out at 5.72x with a 23% move.  However, the structure manages to get the downside breakeven price up to about $240 which is only about 2.5 ATRs away.  The expected value on this trade is anywhere between $600 and $1,000 using projected vol and $1,400 to $2,100 using implied vol.       2. Long Vol Kinder Morgan (KMI): Short shares 290 at $31.88 Long 6 November $32 calls at $0.78 There's something very interesting going on with Kinder Morgan options ahead of tomorrow's ea...

Historically, equity market volatility has created some of the best money making prospects for investors who are willing and able act on the opportunity.  Merck & Co., Inc. (MRK) is an American large-cap pharmaceutical and animal health care stock.  The stock has enjoyed an almost uninterrupted run over the past 4 years going from the low $30s in late 2011 to more than $63 earlier this year... all while paying a consistent dividend. However, like most health care and pharmaceutical stocks, Merck has experienced a notable price correction over the last few weeks.  Here are three options strategies to capitalize on the stock’s recent volatility. It’s important to note that Merck is expected to report 3rd quarter earnings on October 27th before the bell.  Earnings announcements are almost always considered a potential price catalyst and options prices reflect this with higher than normal implied volatility. PLAYING THE BEARISH TREND The first strategy is to use opt...

"WELCOME THOSE BIG, STICKY, COMPLICATED PROBLEMS... IN THEM ARE YOUR MOST POWERFUL OPPORTUNITIES..." Watergate was the biggest political scandal in this country's history but it didn't start out that way.  Rather, it started as an overlooked story about a bungled break-in... many thought it was nothing more than a prank.  For two young unknown reporters, however, something didn't make sense and they started asking questions. Back in July - in anticipation of rising market volatility - I wrote a post on buying volatility to hedge against systematic corrections... http://tancockstradingblog.blogspot.com/2015/07/buying-volatility-to-hedge-against.html One thing I noticed in researching that post was that it was difficult to get significant protection using long-dated index options.  I noted the issue but moved on with the problem I was trying to solve at the time. Then in August, I wrote about a new trading model I built that was ultimately called 'Optimized Pos...

Earnings season is coming up but here's a position that can be put on now that I think has a very high upside. KORS has been absolutely crushed... back in early 2014 is was approaching $100 a share but is now at $43.5.  The stock really didn't get hurt during this last round of market volatility which suggests a stable floor.  Lastly, from a technical perspective it is nearing the end of a long consolidation pattern and if it breaks out over its 100-day moving average it could get a nice bid. Here's the chart: You can see the 50 and 100 day moving averages are closing in on each other... like I said if it breaks out over the 100 it has a ton of room to the upside which is why I would put this trade on now even though it doesn't report earnings until early November. Here's the trade: Short 1 November $45 call at $2 Long 6 November $52.5 calls at $0.35 Here's the payout chart:

WHERE WRONG IS RIGHT AND BAD IS GOOD In his sequel to the classic children's novel 'Alice in Wonderland', Lewis Carrol takes us into a world of inversion in 'Through the Looking Glass.'  In her surreal state, Alice discovers that everything exists from the perspective of reflection and little makes sense. If this sounds familiar, then you're either experimenting with hallucinogens or you're a trader. Friday's Nonfarm Payrolls and Unemployment reports delivered an uninspired picture of job growth during the month of September.  Naturally, the stock market reveled in this news and the S&P rallied 1.4% while moving more than 50 points intraday. The entire bull-market cycle from 2009 up until August of this year was predicated on the market's addiction to free money... like a child addicted to sugar.  Just like a spoiled child, the market throws a tantrum when it thinks that sugar flow might slow down.  Consequently, bad economic news is good news fo...