Playing GG Earnings
Add Strangle Now, Roll FAZ and SDS
PLAY: Buy the GG April 40 Calls (O:GG 10D40.00) and the GG April 39 Puts (O:GG 10P39.00) at market, good for the day. Buy each contract on a 1-for-1 basis. For example, if you buy 5 calls, also buy 5 puts. Do not place a stop limit or sniper sell at this time.
PLAY: Sell your SDS March 35 Calls (O:SDS 10C35.00) and our FAZ March 18 Calls (O:FAZ 10C18.00) at market, good for the day. Then, buy the SDS April 33 Calls (O:SDS 10D33.00) at market, good for the day.
Dear Bottarelli Research Member,
First off, congratulations on your AMZN profits. Although ESI was a bummer, it’s always nice to temper a losing play with a strong winner. As the markets continue to shake out, I think we’re well-positioned with our GMCR April 90 Calls (O:GMCR 10D90.00) and our CF April 105 Calls (O:CF 10D105.00) going forward. Hold.
In terms of a new earnings play, we have an interesting opportunity from gold play Goldcorp (GG – NYSE). As a major gold, silver, copper, lead, and zinc ores producer, GG, has operations in Canada, the United States, Mexico, and Central and South America. After the bell today, Goldcorp is scheduled to report earnings of $0.25 per share. As you probably know, gold prices that have remained over $1,000 per ounce have helped major gold miners like Newmont Mining and Barrick Gold report blockbuster results in their latest reports. It appears like Goldcorp is ready to do the same thing.
According to my research staff, GG has moved up in response to four out of the last five earnings reports. Therefore, a move of $4.00 is easily in the cards. But then again, GG could also sell off on the news, which has been a typical earnings reaction for previous companies. Given this situation, it lends itself to another earnings strangle play.
The strategy here is to play both sides of the coin. Using a combination of GG calls and puts, a strong earnings move (either up or down) will allow us to lock in profits on one side of the position. For example, the GG April 40 Calls (O:GG 10D40.00) currently trade for $1.70 and the GG April 39 Puts (O:GG 10P39.00) currently trade for $1.60. Add them together and the total cost is $3.30. If GG can move $4.00 in either direction, the combination of both plays could move up to $5.50, thus returning a nice 50% to 60% gain on the entire position. Given GG’s past history with earnings reports, I think it’s worth getting positioned. Here’s the play…
PLAY: Buy the GG April 40 Calls (O:GG 10D40.00) and the GG April 39 Puts (O:GG 10P39.00) at market, good for the day. Buy each contract on a 1-for-1 basis. For example, if you buy 5 calls, also buy 5 puts. Do not place a stop limit or sniper sell at this time.
Next us is our “roll” play on our SDS March 35 Calls (O:SDS 10C35.00) and our FAZ March 18 Calls (O:FAZ 10C18.00). To maintain a proper level of market protection, let’s go ahead and sell both of these positions now for nominal value. Then, use the proceeds from this sale (combined with new capital) to get re-positioned in SDS April 33 Calls.
PLAY: Sell your SDS March 35 Calls (O:SDS 10C35.00) and our FAZ March 18 Calls (O:FAZ 10C18.00) at market, good for the day. Then, buy the SDS April 33 Calls (O:SDS 10D33.00) at market, good for the day.
And as always…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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