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Earning Play “FUL” tonight, a case to study

Published on January 16, 2007

Earning Play “FUL” tonight, a case to study

January 16, 2007

I am planning to play FUL tonight and here is the chart of the stock for the past 1 yr/daily: 

  FUL Jan 16 Chart

 Notice the areas around earning announcement, the stock has moved roughly by 10% easily after the earning were announced. That’s what I am looking for, large moves. For my spread I was filled for $2.65 credit—>. Based on this trade, the risk to reward looks like this: 

 

FUL Jan 16 Trades

FUL Jan 16 RR Chart

How will I make money?  If the stock moves above $32.2, my profit is unlimited, to the extent of upward move. If the stock falls below $27.5, I will make $265 (for $235/investment/per spread) which I received as credit for opening this trade. How will I lose money? I will lose the maximum of roughly $235 ($500-$265) which is required as margin, if the stock stays in between $27.6 and $32.2. Other important factor to look at is the volatility. Current volatility is to the tune of 100% which will be crushed tomorrow after the earning announcement. My buy side therefore will hurt me as well (sell side is otherwise).The spreading was simple; the art will be on how do I close tomorrow. Till then, Profitable trading, OptionPundit 

3 Comments

  • Avatar optionpundit says:

    By MarketWatch
    Last Update: 10:31 PM ET Jan 16, 2007

    H.B. Fuller quarterly income rises on coatings unit sale (10:11 PM ET) SAN FRANCISCO (MarketWatch) — H.B. Fuller Co. Tuesday evening said fourth-quarter net income rose, as the company recorded a $68.9 million gain on the sale of its powder coatings business, to $75.7 million, or $1.25 a share, from $23.3 million, or 40 cents a share, during the same period in the prior year. Before items, quarterly per-share income was 50 cents, or 48 cents from continuing operations. Analysts polled by Thomson First Call were looking for per-share income of 46 cents. The adhesives, sealants and coatings company said quarterly revenue rose to $395.6 million from $394.4 million in the prior year. For fiscal 2007, H.B. Fuller sees earnings per share of $1.58 to $1.68, while Wall Street is looking for $1.63.

  • […] Without waiting for any further fall in the stock, I bought back my short leg of the back spread that I opend last night. As mentioned in the last post here, i had received $2.65 credit. I bot back my sold leg for $1.95 and I have 2 call legs ($30). This might serve as lottery ticket in case the stock decide to come back. With this, it resulted in 29.8% proift for holding for 1 night. Please do note this is a speculative trade, which is not my bread and butter strategy. It is only for accelerating the returns at “certain” time. This is high risk/high reward/loss kind of play. […]

  • Avatar Simon says:

    Optionpundit…why do you prefer backspreads over Straddles oe strangles. An good site to look for movers is http://www.Optionslam.com

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