OptionPundit

Tag: How to play earnings

  • Harley Davidson (HOG), Run Away or Ride

    Harley Davidson (HOG) will be announcing results prior to market open tomorrow. The expectation is to deliver $0.52/share.

    While it can always turn tables around to beat earnings (via price increase etc), I would like to play bearish on this. Fine, I agree that it has a very loyalist customer base, the expectations are already low and all that. But consumer spending going downhill, big ticket items on hold and “needs” taking over “wants”, I don’t expect Harley to announce wonderful results. I don’t have enough information to make comments on how the financial arm doing but my gut says it might not be doing to well either.

    (You may want to sign-up for the Basic Membership (Free until Dec 2009) that I use to share free trade alerts for registered members)

    Bottom line, I am not positive about HOG announcing a great set of results and therefore will look for bearish trades (either vertical or the backspread, double calendar is also an option).

    JP Morgan (JPM) is another major company to announce its scorecard tomorrow. It’s anybody’s guess on how are they going to report especially with the developments that took place last week. Goldman (GS) reported solid numbers, inferring from that we might see positivity from JP, but hey, I have no intentions to play this one.

    Disclaimer– As of this writing, I own the mutiple bearish trades (and still have some open orders), but I may close it without any prior notice. If you do want to follow this trade, pls do your own due diligence and consult your financial adviser. There is not much time left for April expiration, should you decide to follow this trade, pls keep either a risk management plan in place or risk only the montey you are willing to lose 100%

  • Decker Outdoor (DECK) Beat but Lowers Estimates

    Footwear maker Deckers Outdoor Corp (DECK) posted a higher-than-expected fourth-quarter profit, helped by higher sales of its premium UGG brand, but forecast 2009 profit below market estimates, sending its shares down almost 10 percent. With this gap-down, I am expecting to have My DECK puts to yield about 100% for one day holding. Here is what I shared with OPN Bonus Trade post-

    Contrary to what street thinks, I am thinking DECK will have to convince they are different. My hunch is that it will gap down. I purchased a few Mar 45 Puts contracts for 1.65, and I know clearly that I may lose all of this (This is speculative trade)

    Deckers Outdoor expects 2009 earnings to be flat at $7.27 a share, or lower, on a non-GAAP basis. Analysts were looking at $8.05 a share. The company also expects first-quarter 2009 earnings to fall about 28 percent on higher costs related to new retail stores, warehouse operations and international infrastructure.

    Earnings play are very speculative in nature and best chances are 50/50, we can try to improve our chances by detailed analysis but still it is 50/50. Hence, should you play such speculative trades, I encourage only to allocate 2-3% of your capital, and the only one that you are willing to lose to take this chance.

    Waiting for makets to give its verdict to DECK when it opens,

    Profitable Trading, OP