Focus When Frustrated

 | May 14, 2014 | 12:46 PM EDT
  • Comment
  • Print Print
  • Print
Stock quotes in this article:










I've encountered lots of frustrated traders out there. It's a frustrating market for sure. Then again, I've met very few markets that haven't frustrated at least some folks.

If you find yourself in the frustrated camp, then walk away. I don't care if it is a few minutes, a few hours or even a few days. Don't force the issue or a trade. Frustration will turn into forced trades, which will turn into losses, which will create even more frustration. It's an ugly spiral, so just avoid it.

If I find a market frustration, then I will focus on a small group of stocks or a specific catalyst. There are still plenty of earnings names out there, so it is the catalyst on which I am focused right now. In the morning, I like to get together a list of stocks and put down some notes based on the past earnings reports. Then in the early afternoon, I'll do the chart work on one to three names that I find most interesting.

Here are the notes I put together this morning.

Cisco Systems (CSCO) will obviously be closely watched after the bell. Options are pricing in an implied move around 4.6%. The last few earnings reports have seen intraday moves, which have exceeded 4.6% and only the last report actually closed with a move smaller than 4.6%. But the implied move this time around is smaller than any report over the past year. Buying a straddle based on the implied moves on the past four earnings reports has resulted in a profit three times and done very well if you closed the position within the first 30-60 minutes of trading. Even the one loser wasn't horrible if closed quickly. The best trade has been buying near the open or a move down around 0.5% after the open.

Vipshop Holding (VIPS) is not for the faint of heart. This stock carries with it a fairly-large implied moves with this earnings report coming in at 11%. An intraday maximum more or less than 11% higher or lower from the previous day's close would be a departure from all four of the previous earnings reports. In other words, selling the front-month straddle is dangerous. Furthermore, intraday ranges have been absolutely huge on this name more often than not, coming in at 15+%! So, straddles in front of earnings have worked, but buying the at-the-money front month or next month straddle on the open AFTER earnings have been reported has been the trade that has returned significantly better profits.

Acxiom (ACXM) is a pretty basic one for me post earnings. The stock has seen a continuation of the move at the open around 4-6%. Following the initial direction and cutting after a 4-6% move has been the best play. A close second has been buying the stock if it fades an additional 5-6% after a down opening then looking to sell it at the close.

I may take a look at (NTES) as well, but the only thing standing out there are the relatively small moves by the close of the trading day. The stock has failed to move beyond its implied move by the close of trading on the last four reports. It has a very Deere (DE) feel to it.

Columnist Conversations

We will take off some more risk, bank some winners SOLD PG OCT 90 CALL AT 3.3 (in at 2.90) ...
After a very calm and sedate period of volatility which saw the VIX fall not only to all time lows but had a r...
today is a good day to lighten the load and take some positions off the table. SOLD WB OCT 85 CALL AT 11 (i...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.