On Thursday, after the market close Amazon reported their fourth quarter earnings. They beat their earnings expectation, but due to increase expenses as stated on the conference call, and drove the price down largely. It attempted to make her early recovering, but just think further and further.Like last year, when Amazon and Google disappointed on their earnings, the whole market came down. It is extremely important to make sure that you get out of your trade in a timely fashion. When you get too greedy, you end up losing more than you gained.
I got out of my puts on Alphabet missing the right time and
costing me $600 on Thursday. I didn't make the same mistake today which was very important because it was the day of expiration. I did make money on alphabet 1130 calls, but lost a little too much on a 1135 call that I didn't sell promptly.
Alphabet's normal trading on Fridays consist of going up sharply, retracing down near the low the day, going back up and falling short of where it peaked earlier, and going down for most of the rest of the day. Very good money can be made with puts and decent money can be made with calls on Fridays as long as your problems with your execution and don't fall in love with your holdings.
From my chart above you can see where I recommend positions. This is the typical movement of Alphabet on a Friday, but the past 3 out of 4 weeks it has not moved in the typical pattern.
I don't like holding options over night because you don't know what will happen by the next day let alone after a weekend. Typically you can buy the same calls on Monday unless Tesla opens considerably higher. Hopefully I can benefit from Tesla running up to 330 early Monday morning and I can sell then.
On Thursday morning, when I saw that Tesla was not going down, I decided to sell a covered 3/1/19 Put with a 280 strike price for $800. I picked that strike price because it bounced off 280 at the bottom of the most recent drop before the earnings release. Therefore I expect it to go up and this option expire worthless on March 1st, but if it does go down by then even in a larger market decline the level of 280 should hold for Tesla. I found this strategy makes more sense than being subject to risk of holding on the stock.
I got fed up with UGAZ and it's strange movement that don't make sense. I did find that Antero Resources Corporation (AR) does make sense as it is a company in the Natural Gas field with positive earnings and does have options available on it. AR his a 5 year low on Thursday below 10 and it bounced when UGAZ didn't. UGAZ went down further on Friday, but AR went up. When AR was at 10.21 on Friday, I sold 5 3/15/19 10 strike Puts. I might decided to buy this stock also, but at this point I feel I can make a high probability profit even if it doesn't go much higher by expiration.
I had been following someone on YouTube recently who discusses options trades, but I have found him making some dumb errors that didn't make sense. I am not saying that I am an expert, but to sell an out of the money naked call option 5 months out on Boeing the day before earnings has to be the dumbest move I have ever seen. There is a possibility that it goes down and he might be able to buy it back slightly over what he received on it. There is a probability that Boeing blows through that 400 strike price before the next earnings call, especially if there is a trade deal done, but definitely by their next earnings report.
This year is starting to look like last year in terms of the market movement, but this year is quite different. Last year the market had a large amount of volatility due to over inflated market after the next tax bill was passed, companies wrote off more expenses in the fourth quarter of 2017 to take advantage of the higher tax break, emerging markets were declining, new Fed Chairman Powell starting moving interest rates too quickly and trade tariffs were affecting everyone when nobody was expecting them at all.
This year is different because the Fed chairman has learned how to talk without disrupting the stock market, we might be getting closer to a trade agreement, and consumers are about to experience some of the largest tax refunds ever. Amazon's warning of higher expenses might have spooked investors Thursday and Friday, but it is the same thing that Google did last year when everything reversed course. It was pointed out on CNBC's Options Action on Friday that Alphabet appears to be in a head and shoulders pattern, but you could say that about so many companies that I broken out after hitting a 52 week low and bounced to move sharply up. Typically these 52 week lows have been 50% of their all time highs. Alphabet is the one FANG member with probably the highest diversity along with the lowest growth movement. I don't see Alphabet moving more than 100 points lower, but I also don't see that coming until it have moved 300 points higher.
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