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Kevin M. O'Brien
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Options trader full-time, author, owner of www.kevinmobrien.com, a subscription-based service. Born in Chicago. Follow many stocks in the tech, financial, and agricultural sectors. Trade daily with a 5 Technical Indicator Strategy I developed. Also trade debit spreads, strangles, and also hold... More
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Kevin M. O'Brien
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Breakthrough: A Consistent Daily Options Trading Strategy For Volatile Stocks
  • A Johnson & Johnson Earnings Trade For Next Week 1 comment
    Apr 12, 2013 11:40 AM | about stocks: JNJ

    Johnson & Johnson (NYSE:JNJ) is scheduled to report their quarterly earnings on Tuesday, April 16, 2013, before the market opens. The stock is currently trading at $82.57/share. The 52-week range is $61.71 - $82.96

    This is an ideal price to be trading at because the strike prices are in increments of $2.50. This is extremely non-volatile stock that does not move too much after reporting earnings.

    The trade I am placing is a Neutral Calendar Spread. I will be using the April 2013 expiration (sell) and May 2013 expiration (buy). Here is how the trade is placed:

    Entered Trade

    Sell -10 JNJ Apr13 82.5 Call
    Buy 10 JNJ May13 82.5 Call

    Requirements

    Cost/Proceeds $590.00
    Option Requirement $0.00
    Total Requirements $590.00
    Estimated Commission $30.00

    The NBBO bid/ask: 0.56 - 0.59. I would pay no more than 0.61 for this trade using a limit order. Here is a look at the profit/loss chart:

    (click to enlarge)

    I would not be too surprised if this trade profited ahead of their earnings release, but it is never a good idea to always count on that, ahem. Hint, hint.

    If you have any questions, please leave a comment or send me an e-mail.

    Disclosure: I am long JNJ.

    Additional disclosure: I have this trade already placed.

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Comments (1)
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  • QUIKTDR
    , contributor
    Comments (16) | Send Message
     
    Strategy Implementation

     

    How long after one gets a BB breach can one enter a put/call trade?

     

    For example: one gets a BB breach but all 4 indicators don't reach their point immediately but do 3-5 bars later. Is this still a valid entry point or does all five have to signal simultaneously?

     

    Thank you in advance!
    12 Apr 2013, 12:05 PM Reply Like
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