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Yahoo
08-07-2025
- Business
- Yahoo
How To Get Paid During this New Earnings Season
Earnings season is here and we've got the first batch of big name companies reporting earnings this week with Delta Airlines (DAL) and Conagra Brands (CAG) kicking things off on Thursday. Then next week we have Netflix (NFLX), Taiwan Semiconductor (TSM), JP Morgan Chase (JPM), Wells Fargo (WFC), Bank of America (BAC), Goldman Sachs (GS) and American Express (AXP). Constellation Brands Stock is Down But Produced Good Earnings - Is STZ a Buy Here? Trading DAL Earnings? This Naked Put Play Benefits from Volatility How Unusual Options Standout Boston Scientific (BSX) is Signaling a Statistical Edge Markets move fast. Keep up by reading our FREE midday Barchart Brief newsletter for exclusive charts, analysis, and headlines. In today's article, we will look at how to use Barchart's Screener's to find option trade ideas for this earnings seasons. Stock Screener The first step is to use the Stock Screener to find companies with good option volume and upcoming earnings. Here's a good scan that you might like to use: Total Call Volume greater than 1,000 Market Cap greater than 10 billion Latest Earnings Date Between July 10 - 18 This will give us companies with upcoming earnings releases that have good option volume. Trading stocks with good option volume is important because it will mean it is easier to get filled on trades and the bid-ask spread is likely to be lower. The above screener gives us these results: Now we can pick the company or companies we want to trade and decide on a strategy. Let's look at an example. TSM Iron Condor An iron condor aims to profit from a drop in implied volatility, with the stock staying within an expected range. When implied volatility is high, the wider the expected range becomes. The maximum profit for an iron condor is limited to the premium received while the maximum potential loss is also capped. To calculate the maximum loss, take the difference in the strike prices of the long and short options, and subtract the premium received. As a reminder, an iron condor is a combination of a bull put spread and a bear call spread. First, we take the bull put spread. Using the July 18 expiry, we could sell the $210 put and buy the $205 put. That spread could be sold yesterday for around $0.45. Then the bear call spread, which could be placed by selling the $250 call and buying the $255 call. This spread could also be sold yesterday for around $0.44. In total, the iron condor will generate around $0.89 per contract or $89 of premium. The profit zone ranges between $209.11 and $250.89. This can be calculated by taking the short strikes and adding or subtracting the premium received. As both spreads are $5 wide, the maximum risk in the trade is 5 – 0.89 x 100 = $411. Therefore, if we take the premium ($89) divided by the maximum risk ($411), this iron condor trade has the potential to return 21.65%. If the stock price stays flat, then iron condors will work well. However, if TSM stock makes a bigger than expected move, the trade will suffer losses. Trades held over earnings allow little room for adjusting, so they can be a bit hit or miss. TSM has stayed within the expected range following three of the six most recent earnings releases. Although as we know, past performance doesn't guarantee future performance. Traders can also use the Bull Put Spread Screener if they have a bullish outlook or the Bear Call Spread Screener if they have a bearish outlook. Another strategy worth consider is a cash secure put, like this example on Delta Airlines. Conclusion And Risk Management Trading options over earnings can be risky and is not recommended for beginners. Short-term trades over earnings such as these ones are almost impossible to adjust. Either the trade works, or it doesn't so position sizing is vital. Short strangles involve naked options and should be avoided by beginner traders. Short-term trades also have assignment risk, so traders need to be aware of that possibility. Please remember that options are risky, and investors can lose 100% of their investment. This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions. On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
06-07-2025
- Business
- Bloomberg
Jane Street's Cash Machine Comes to an Abrupt Halt in India
Home to at least a half dozen high-speed trading firms, the blue-glass building with a rooftop helipad and a bronze bull sculpture in its plaza has been the center of a trading boom that made India the world's biggest equity derivatives market by volume. Foreign funds and proprietary traders using algorithms made $7 billion in the 12 months to March 2024 alone. That bonanza may be coming to an end. On Friday, nine months after the nation's securities regulator tightened restrictions on options trading to protect retail investors, it accused Jane Street Group — one of the market's biggest players — of manipulating prices to generate hundreds of millions of dollars in ill-gotten profits.
Bloomberg
04-07-2025
- Business
- Bloomberg
Why Regulators Are Cracking Down on India's Giant Options Market
India has gone from being a small player in the highly speculative equity derivatives market to the world's largest, all within just five years. Daily turnover in the market – which includes options trading – now sits at about $3 trillion. The markets regulator has become increasingly concerned about this segment of the market, particularly because of its sudden popularity among inexperienced retail investors chasing quick returns. It has previously warned that these traders could face big losses when bets go wrong, particularly against larger financial market players.
Yahoo
02-07-2025
- Business
- Yahoo
Eli Lilly (LLY) Faces Bearish Options Flow, But Probabilities Tell a Different Story
At first glance, pharmaceutical giant Eli Lilly (LLY) may seem like an awfully risky wager. On Friday, LLY stock fell 2.47%, bringing its year-to-date performance to only 0.45% above parity. For context, the benchmark S&P 500 index — which isn't exactly lighting up the scoreboard — has gained nearly 5% during the same period. As such, the soft return looks rather conspicuous. Further, LLY stock represented one of the entries in Barchart's screener for unusual stock options volume — but not necessarily for good reasons. Following Friday's closing bell, total options volume reached 54,014 contracts, representing a 29.74% lift over the trailing one-month average. Breaking down the details, call volume was 29,060 contracts while put volume stood at 24,954. Jeff Bezos Unloads $5.4B in Amazon Shares: Should You Buy or Sell AMZN Stock Now? Options Flow Alert: Bulls Making Their Move in GOOGL Stock Nvidia: 3 Long Call Plays – One Was Clearly Built for Profit Stop Missing Market Moves: Get the FREE Barchart Brief – your midday dose of stock movers, trending sectors, and actionable trade ideas, delivered right to your inbox. Sign Up Now! The above pairing yielded a put/call ratio of 0.86, which might seem bullish. However, options flow — which focuses exclusively on big block transactions likely placed by institutional investors — revealed that net trade sentiment heading into last weekend was more than $1.6 million below parity, thus favoring the bears. Overall, gross bearish sentiment was $3.409 million below parity while gross bullish sentiment was $1.806 million. Still, it's important to point out that unusual options activity — as useful as it may be — isn't the end-all, be-all to determine the forward trajectory of LLY stock. Indeed, it would be a presuppositional fallacy to take the aberrant data from the derivatives market and assign a probabilistic thesis. Instead, we can turn to market demand profiles to better gauge the current sentiment regime and conduct a statistical analysis on what we can expect in the future. However, to do this exercise requires some rearrangement of market data. Initially, the process of calculating the forward probability of LLY stock (or any security) seems like a straightforward exercise: merely take the frequency of the desired outcome divided by the total number of events in the dataset. However, this exercise only calculates the derivative probability or the outcome odds over the dataset's entire distribution. What we're looking for? We need conditional odds, which are the outcome odds over a specific subset of the data. To use a baseball analogy, derivative probabilities are similar to a player's batting average last season. Conditional probabilities are akin to situational batting averages, such as when there are runners in scoring position (RISP). The latter is a much more useful metric. Unfortunately, you can't just plug in typical financial metrics such as share price or valuation ratios as these figures are continuous. That's why I prefer converting stock price data into market breadth or sequences of accumulative and distributive sessions. Market breadth is functionally binary and by logical deduction is a discrete event. In the past two months, the price action of LLY stock can be converted as a '6-4-D' sequence: six up weeks, four down weeks, with a negative trajectory across the 10-week period. Admittedly, this conversion process compresses LLY's magnitude dynamism into a simple binary code. But the benefit is that this code can be categorized into distinct, discrete demand profiles over 10-week intervals. These profiles can then serve as the basis for past analogs to ultimately extract forward probabilities. Specifically, when the 6-4-D sequence flashes, the price action in the following week (which in this case corresponds with the business week beginning June 30) sees upside 68.42% of the time, with a median return of 2.47%. Should the bulls maintain control of the market over the next three weeks, LLY stock could reach near $812. With the market intelligence above, aggressive speculators may consider the 795/805 bull call spread expiring July 25. This transaction involves buying the $795 call and simultaneously selling the $805 call, for a net debit paid of $555, the most that can be lost in the trade. Should LLY stock rise through the short strike price ($805) at expiration, the maximum reward is $445, or a payout of over 80%. Granted, based on the above numbers, one could theoretically opt for the 795/810 bull spread, also expiring July 25. However, the net debit required is $690, which is a hefty nominal risk, though the payout is enticing at 117.39%. Either way, what makes the above strategies attractive is the implied shift in sentiment regime of the 6-4-D sequence. As a baseline, LLY stock enjoys a strong upward bias, with the chance that a long position will be profitable on any given week clocking in at 60.18%. What the 6-4-D does is to tilt the odds even more in favor of the bullish speculator. You're not going to get that kind of detail or insight from just reading and interpreting unusual options activity. That's why I believe it's important to think in discrete terms rather than attempting to find patterns in continuous signals. On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. 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Yahoo
28-06-2025
- Business
- Yahoo
The Saturday Spread: Data-Driven Trades That Cut Through the Noise (GILD, MCD, DJT)
One of the major concerns regarding investment market analysis is the acceptance of presuppositional fallacies as actionable insights. While mentioning a decline in share price or a financial valuation ratio may be a statement in fact, the fallacy occurs when the analyst assumes that the metric at hand carries predictive value without first validating the assumption. For example, in the financial publication space, you'll often hear phrases like such-and-such stock may bounce off support or that a company's modest price-to-earnings ratio represents good value. However, these claims are merely assertions unanchored to an empirical basis. The claims could turn out to be accurate or they might not — they're educated guesses at best. This Options Trade Lets You Buy Palantir Stock Without Worrying About Whiplash Sell Short AMZN Put Options (Out-of-the-Money) to Make a 2.0% Monthly Yield British American Tobacco's Unusual Options Activity Sets Up Nicely for This Multi-Leg Strategy Our exclusive Barchart Brief newsletter is your FREE midday guide to what's moving stocks, sectors, and investor sentiment - delivered right when you need the info most. Subscribe today! To avoid falling into the presuppositional fallacy trap, I prefer to utilize conditional probabilities — using past analogs to determine forward probabilities. However, financial metrics such as share price or valuation ratios are continuous signals, which prevent easy categorization. To remedy this dilemma, I convert past historical data into market breadth — or sequences of accumulative and distributive sessions. By default, demand profiles based on binary market breadth data, lend themselves to categorization and quantification. Because each profile is a distinct, discrete behavioral state, it's possible to monitor the probability of transition from one state to another. Such an analysis would simply not be possible when using continuous signals such as raw share prices. The other critical advantage of converting price data into market breadth is that all publicly traded securities now speak the same language. This data can then be thrown into a spreadsheet, where it can be sorted based on probability of upside. That's exactly what we're doing here with the Saturday Spread. We're focusing on the most actively traded stocks which statistically offer higher-than-average odds for bullish speculators. Using math doesn't guarantee success but what it does is provide a rational justification for betting. Let's get right into it with biopharmaceutical giant Gilead Sciences (GILD). In the past two months, the price action of GILD stock can be converted as a 4-6-U sequence: four up weeks, six down weeks, with a positive trajectory across the 10-week period. Admittedly, this process compresses GILD's magnitude dynamism into a simple binary code. However, the benefit is that this code can now form the basis of past analogs for the purpose of calculating probabilistic analysis. Statistically, in the past five years, whenever GILD stock printed a 4-6-U sequence, there's a 69.23% chance that the following week's price action (which corresponds to the business week beginning June 30) will result in upside, with a median return of 3.41%. Should the bulls maintain control of the market, GILD may see an additional 2.22% increase in the second week. What makes this setup intriguing is that, as a baseline, the chance that a long position in GILD stock will be profitable is 53.1%. Therefore, the 4-6-U sequence is signaling a potential 16.13% long-side delta over the baseline, strongly incentivizing a debit-based strategy. Using the market intelligence above, GILD stock could hit close to $117 within two or three weeks. According to information provided to Barchart Premier members, risk-tolerant speculators may consider the 111/116 bull call spread expiring July 18. This transaction requires a net debit of $211, with a maximum reward of $289 possible if GILD reaches $116 at expiration. As stated above, that's statistically a rational target, making this trade very enticing. Another name to keep on the radar for next week is fast-food icon McDonald's (MCD). In the past two months, MCD stock printed a 3-7-D sequence: three up weeks, seven down weeks, with a positive trajectory across the period. Ordinarily, the balance of distributive sessions far outweighing accumulative sessions could dissuade investors from jumping on board. However, investors statistically tend to buy the dip. How can this statement be justified? In 68.75% of cases, the following week's price action (again, this corresponds to the business week beginning June 30) results in upside, with a median return of 2.42%. Should the bulls maintain control of the market for a second week, past responses reveal that the median return is an additional 2.04%. As a trusted blue-chip stock, McDonald's already enjoys an upward bias. As a baseline, the chance that a long position will be profitable over any given week is a stout 56.64%. Therefore, unless you had a compelling reason to go contrarian, it's better to be bullish. That's even more so when it comes to the 3-7-D sequence, which adds 12.11 percentage points of favorable odds to the bullish speculator. From the market intelligence above, MCD stock could be on its way to reach around $304.70 within the next two to three weeks. Notably, market makers have a dim view of the Golden Arches. Therefore, the 295/300 bull call spread expiring July 25 offers a 123.21% payout, with a net debit required of only $224. It's risky but awfully tempting given the empirical framework. A controversial company, Trump Media & Technology (DJT) nevertheless deserves consideration, in part because President Donald Trump has been scoring multiple political victories. Thanks to the meme-like qualities of DJT stock, the security could potentially pop higher following its extended slump. There's also a quantitative logic at play here. In the past two months, DJT stock printed a 2-8-D sequence: two up weeks, eight down weeks, with a negative trajectory across the period. While an ugly sequence due to the heavy presence of distributive sessions, investors historically tend to buy the dip. Whenever the 2-8-D sequence flashes, the following week's price action results in upside, with a median return of 1.7%. Should the bulls control the market for a second week, the median return assuming the positive pathway is 8.06%. What's really enticing is that in the fourth week, irrespective of the pathway, DJT's median return is, at minimum, 23.33%. To be clear, there are zero guarantees in this game. However, if you had some 'stupid money' to gamble with, DJT stock is an idea to keep on your radar. DJT has been moving all over the map on Friday, creating some chaos in the options market. However, one idea to consider is the 18/19 bull call spread expiring July 25. While this trade requires a sizable leap from DJT, past analogs demonstrate that such upward mobility is possible, perhaps even probable. On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Sign in to access your portfolio
