December 6, 2019 Terry’s Tips Trade Alert #2 – Earnings Eagle   Portfolio

LULU announces earnings after the close next Wednesday, December 12.  The options are pricing I an 8.5% move while the recent average move has been 11.1%.  While this does not give us a statistical advantage, the at-the-money 230 calendar buying the 24Jan20 option and selling next week’s option would cost about $3.30 which is only about a third of the option we are selling, and that makes it appear like a very good play according to our formula.

BTO 1 LULU 24Jan20 210 put (LULU200124P210)
STO 1 LULU 13Dec19 210 put (LULU191213P210) for a debit of $2.90 (buying a calendar)

BTO 1 LULU 24Jan20 215 put (LULU200124P215)
STO 1 LULU 13Dec19 215 put (LULU191213P215) for a debit of $3.12 (buying a calendar)

BTO 1 LULU 24Jan20 220 put (LULU200124P220)
STO 1 LULU 13Dec19 220 put (LULU191213P220) for a debit of $3.27  (buying a calendar)

BTO 1 LULU 24Jan20 225 put (LULU200124P225)
STO 1 LULU 13Dec19 225 put (LULU191213P225) for a debit of $3.30  (buying a calendar)

BTO 1 LULU 24Jan20 230 put (LULU200124P230)
STO 1 LULU 13Dec19 230 put (LULU191213P230) for a debit of $3.25  (buying a calendar)

BTO 1 LULU 24Jan20 235 call (LULU200124C235)
STO 1 LULU 13Dec19 235 call (LULU191213C235) for a debit of $3.60  (buying a calendar)

BTO 1 LULU 24Jan20 240 call (LULU200124C240)
STO 1 LULU 13Dec19 240 call (LULU191213C240) for a debit of $3.42  (buying a calendar)

BTO 1 LULU 24Jan20 245 call (LULU200124C245)
STO 1 LULU 13Dec19 245 call (LULU191213C245) for a debit of $3.17  (buying a calendar)

BTO 1 LULU 24Jan20 250 call (LULU200124C250)
STO 1 LULU 13Dec19 250 call (LULU191213C250) for a debit of $2.82  (buying a calendar)

 
Be prepared to change this (these) price limit(s) by $.05 or more in order to get an execution.

Happy trading.

Terry