$LULU is on my watch-list and they’re coming into earnings (Thursday) and looking at the active options today can give you a good idea for expectations. What strikes me as odd is that the active options today are on the May strikes, not the April strikes.
The most active strikes today are the May 75 calls and May 70 puts. The chart will give you an idea why:
The 70/75 Straddle is the strategy of choice.
Are people buying this straddle or selling it? The reward profile looks more interesting to me on the sell side, but I honestly don’t know. If anyone has more info, I’d love to know.
Here’s the risk profile for the May expirations if you’re a seller.
The IV30 is at 43.63 and the HV30 is at 31.31. The break-even at expiration is between $62.50 and $82.50. This trade on the sell side looks very interesting to me, that’s a 20 point range. In other words you’d be betting that $LULU will stay over 62.50 and under 82.50 for the next 45 days. If you’re a buyer you’re betting it’ll break out of that range.
Like most of you I’d like to know what’s going to happen tomorrow, personally I’m only staying short on my EUR.USD trades. It’s sideline time for me. I know, I know… The PR machines are going to be working overtime this weekend to pull up the Euro. Tant mieux. If IV/HV stays high, I’ll be looking to sell some options. The bulls out there are pointing at all the resistance lines. Look at $AAPL the 320 line, what a beauty. It’s a buy! $AAPL maybe the only company out there with ‘spark’. Buy religion… $P doesn’t count, $LNKD doesn’t count. Childs play. $YOKU, $BIDU. Good luck. Here’s a passing idea. I’m going to create a table with, let’s say, “several” criteria. Today we’ll start with DUMB, DUMBER, and EXTRA DUMB. Let me know if you follow my reasoning. It’s a pessimistically-wishful-thinking table. Who needs Michigan!
These criteria might change each day but in the interest of strict discipline, I’ll only add or subtract criteria. NEVER change their definitions… “DUMB” will always be just “DUMB“. Today was easy because the only positive news I could find came from a UBS weekly letter proposing we reconsider Fed monetary policy positioning: UBS thinks that most informed investors consider the Fed to be “between a rock and a hard place” and suggest that we start to think more in terms of “sticks and carrots”. I’m giving UBS an EXTRA DUMB(but funny) ranking today. I don’t even follow UBS…
So for a couple of the tickers which interest me:
$AAPL = DUMB. Even quality will follow the market. So bouncers I’m with you!
$PCLN = DUMBER. Speculation can’t hide from the trend. She’ll see 450.
$P = DUMB. What fun for day traders, who buys this sh*t?