Gearing Up for Next Week
Playing the Earning C’s
PLAY: Buy the CYOU February 35 Calls (CQU BG) and the CYOU February 33 Puts (CQU NU) for a total price around $2.45, good for the day. Do not place a sniper sell or stop limit at this time.
PLAY: Buy the CTRP February 32.50 Calls (QCT BZ) and the CTRP February 30 Puts (QCT NF) for a total price around $3.00, good for the day. Do not place a sniper sell or stop limit at this time.
PLAY: Buy the CMI February 47 Calls (CDM BD) and the CMI February 45 Puts (CDM NI) for a total price around $3.20. Do not place a sniper sell or stop limit at this time.
Dear Bottarelli Research Member,
As we gear up for next week’s earnings, I think we have three (3) strong candidates that we can get positioned in now. All three have the potential for huge moves, and oddly enough, all start with the letter “C.” Let’s dive in…
As I mentioned earlier this week, Chinese online gaming company Changyou.com (CYOU – NASDAQ), a subsidiary of Sohu.com (SOHU – NASDAQ), will report their Q4 2009 earnings on February 1st before the market opens. CYOU has a lot of factors working in our favor. First, the Chinese gaming sector has historically been one of the most volatile movers on earnings day, which lends itself perfectly to a strangle position. And second, since CYOU just recently went IPO, floor traders are unsure of what to expect from them on earnings day. Therefore, we can exploit any mis-pricing to achieve a strong winner. From a chart perspective, CYOU could easily break out above $36.00, or break down below $30.00, depending on their reaction to earnings. Therefore, let’s get positioned to profit off this move now!
PLAY: Buy the CYOU February 35 Calls (CQU BG) and the CYOU February 33 Puts (CQU NU) for a total price around $2.45, good for the day. Do not place a sniper sell or stop limit at this time.
Next up is Chinese online travel firm Ctrip.com International (CTRP – NASDAQ). Since we’ve successfully played both CTRP calls and CTRP puts this year, you’re probably familiar with how volatile this stock can be. With earnings scheduled for February 2nd, we could see some fireworks. From a chart perspective, I have the feeling that CTRP could shoot back up to the 50-day moving average at $36.00. Therefore, I’d like to lean a little bit to the upside on this one. This will be reflected in our call/put skew.
PLAY: Buy the CTRP February 32.50 Calls (QCT BZ) and the CTRP February 30 Puts (QCT NF) for a total price around $3.00, good for the day. Do not place a sniper sell or stop limit at this time.
And finally, the last earnings play comes from engine-maker Cummins (CMI – NYSE). Considering CMI’s severe sell-off recently, I also have the feeling that CMI is ready for a large bounce. Tuesday’s earnings could offer the spark that stokes the fire. Let’s get positioned to ride a big earnings reaction with another play that’s slightly biased to the upside.
PLAY: Buy the CMI February 47 Calls (CDM BD) and the CMI February 45 Puts (CDM NI) for a total price around $3.20. Do not place a sniper sell or stop limit at this time.
And as always…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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