December 12, 2019 Terry’s Tips Trade Alert  – Earnings Eagle  Portfolio – limit orders

KMX announces earnings before the market opens next Friday, December 20.  The options are pricing in a 7.0% move while the average recent move has been 5.2%.  This gives us a statistical edge.  The at-the-money calendar which sells the furthest-out (31Jan20) option trades for about $1.40 which is less than half the $3.20 value of the 20Dec19 at-the-money option.  We have had luck at earnings time with KMX earlier this year:

BTO 4 KMX 31Jan20 100 puts (KMX200131P100)

STO 4 KMX 20Dec19 100 puts (KMX191220P100) for a debit limit of $1.25  (buying a calendar)

 

BTO 4 KMX 31Jan20 99 puts (KMX200131P99)

STO 4 KMX 20Dec19 99 puts (KMX191220P99) for a debit limit of $1.40  (buying a calendar)

 

BTO 4 KMX 31Jan20 97.5 puts (KMX200131P97.5)

STO 4 KMX 20Dec19 97.5 puts (KMX191220P97.5) for a debit limit of $1.25  (buying a calendar)

 

BTO 4 KMX 31Jan20 96 puts (KMX200131P96)

STO 4 KMX 20Dec19 96 puts (KMX191220P96) for a debit limit of $1.20  (buying a calendar)

 

BTO 4 KMX 31Jan20 102 calls (KMX200131C102)

STO 4 KMX 20Dec19 102 calls (KMX191220C102) for a debit limit of $1.40  (buying a calendar)

 

BTO 4 KMX 31Jan20 104 calls (KMX200131C104)

STO 4 KMX 20Dec19 104 calls (KMX191220C104) for a debit limit of $1.25  (buying a calendar)

 

BTO 4 KMX 31Jan20 106 calls (KMX200131C106)

STO 4 KMX 20Dec19 106 calls (KMX191220C106) for a debit limit of $1,23  (buying a calendar)

 

Happy trading.

Terry