Trade of the Week Update: RealD (RLD) Back in Single-Digit Territory
MomentumOptionsTrading.com Midday Update for 8/7/2014
Trade of the Week Update: RealD (RLD) Back in Single-Digit Territory/ Put Options Double
12:45 p.m. (EST)
Earlier this week, I profiled RealD’s (RLD, $9.10, down $0.15) upcoming earnings release and showed investors and option traders several different ways to play a possible 10% move in the stock and a possible triple-digit profit with the right option. It is part of my goal to teach you how to find profitable stock and option trades by showing you how to do research and chart work to better your odds of success and to give you a feel for how I trade.
I had mentioned after years of following the company and the movie business industry, my thoughts on RealD has been bearish. I covered their past 4 earnings quarters and how shares reacted and I had a good feeling a double-digit percentage move was coming.
Shares are trending lower again today following Wednesday’s 11% shellacking and drop from $10.39 to $9.25.
I mentioned on Tuesday (read here) it would be a pivotal quarter for the company as the suit-and-ties were expecting a profit. While RealD did report $0.10 a share in the black, it was a penny short of estimates. Revenues also whiffed after sales of $55 million came up short versus estimates north of $61 million for the recently ended quarter.
I profiled the September 10 puts (RLD140920P00010000, $1.10, up $0.10) at double-nickels ahead of the news to play a possible move back to $9-$8.
Shares traded to a low of $9.02 on Wednesday and have kissed $9.10 today. The September 10 puts are showing a paper profit of 100% and if you are in the trade, take half profits off the table and let the rest ride with a tight stop at 80 cents.
As a strangle option trade, the September 12.50 calls (RLD140920C00012500, $0.05, flat) obviously took a hit and went from a quarter to a nickel. As insurance, this less riskier option trade would have cost 80 cents round trip – 55 cents for the calls and 25 cents for the puts – and is up 25% overall, despite the 80% spanking the call options took.
Again, I had a near-term price target of $9-$8 and I always like to remind new subscribers this: Plan the trade and trade the plan.
With these types of returns, it is imperative to lock-in profits.
I still believe shares will trade in the $8′s but most traders get greedy and wait too long to take profits. This can turn profits into losses and why I say to always stick to the game plan. While there may be a little more juice in this mellon to enjoy, the parameters of the trade have been met.
Wednesday’s lackluster action was a good sign today could favor the bears and after a mixed first half, the market is slightly lower.
As the market makes the turn, the Dow is down 38 points to 16,405 while the S&P 500 is lower by 5 points to 1,915. The Nasdaq is losing 3 points to 4,352 and the Russell 2000 is skidding 4 points to 1,121.
There are two trades today playing with triple-digit profits that need attention. One of the current trades is up 140% and the remaining third position could be closed today. I also have another trade that is up 88% and only needs a nickel to lock-in a 100% return on half.
Subscribers, hit the Members Area for the updates and stay close to your email inboxes once again today into the close as I could have New Trades/ Profit Alerts coming.
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Trade of the Week Update: RealD (RLD) Back in Single-Digit Territory
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