Friday, February 11, 2005

A break, earnings season, stock trades - and such

I've been busy at work and haven't had time and the enrgy to write as much as I would have wanted to. I made a few stock buys and some option trades.

Stock trades

CNXS - CNS Inc - It's a small cap company with solid earnings growth and a great chart pattern right now. I bought the stock at 15.9

CUTR - Cutera Inc - Bought at 17.82 Again a small cap company, IPO'd in the last year with excellent earnings growth and a great chart pattren just breaking out of a base.

Earnings Season and options
Earnings season is a great time to make option trades. So far all my option trades have been "directional" meaning I expect the stock to move in a particular way. Earnings season is a great time to make "bi-directional" stock trades. Also at a time like this where the direction of the market is unpredictable, and still volatility is low, earnings season brings out the subdued volatility in a stock. Also front month options are very cheap especially for stocks that haven't moved in a while. So I have been scanning the earnings calendar and looking for interesting stocks which could either miss or hit earnings. Some interesting trades that I made right before earnings using small bets - LAVA APCC LLL XMSR ISIL NTE A few of them moved and a few of them didn't. It is a strategy I'll explore further.
Ex. if the stock is at $15, buy one $17.5 call and one $12.5 put, the expectation being that the stock will move well on earnings news, irrespective of what the earnings are.

I need some more research on companies which are more likely to react to earnings news or companies that are more likely to have an earnings surprise. I'll monitor Starmine a little closer. If anyone has any other interesting ideas on this, please let me know.

What are my options?
So far my directional option trades haven't done very well, stocks have done well. Some of these bidirectional trades have done well. I'm still debating on whether options are really thing thing for me or if I should stick to stocks...

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