A Look at Our Portfolio

This week was rather quiet for us — no new trades, and we didn’t close anything.

But make sure you are still paying attention because next week there’s a slew of possible trades, and things will really start to pick up over the next month or so.

Don’t worry — I’ll update you on everything you need to know; just be prepared to read through our emails so that you don’t miss a new trade alert.

For now, I’ll update you on our three open positions.

Let’s start with Akamai Technologies (Nasdaq: AKAM), in which you just collected a 50% gain for the first half.

In Akamai, we own the May $65 put option. We are currently up 38% on the second half of this trade, with a stop-loss protecting a 10% gain.

Based on our research, Akamai’s drift tends to peak around the two-month mark, which was April 7. Now the stock will start to move as analysts anticipate its next earnings report, which is expected around the end of April. Our option doesn’t expire until May 19, so we could let it ride through that earnings release — but I’m not planning on it.

Instead, what I want to do in the coming weeks is notch up our stop-loss to a tighter position. We can leave it here for now, but next week, we will likely increase it to a tighter stop to lock in greater gains. And we’ll see what happens from there.

On to the next position: Garmin (Nasdaq: GRMN).

We own the July $52.50 call options, and we are currently underwater. At last glance, we were down 55%. While this is nearing our 75% stop-loss threshold, we don’t have to place our orders to close it out just yet.

We are looking to exit this trade around April 21, or next Friday.

So when that date comes around, I’ll look to place a stop closer to where it’s trading, then increase it as necessary.

In other words, I may not close the position exactly on our data-based exit date, because these drifts can still continue trending our way. In our research, we picked an exit date that was an approximation of the optimum holding period — but it’s not exact. Of course, I also know that once we are beyond that date, the odds of the drift kicking in become increasingly small, so I’ll look to manage our position accordingly.

At last glance, the stock was around $49.86, about 6% from our strike price. Nothing too severe. But the stock has meandered lower since it popped on earnings — something we didn’t expect to happen based on our historical research.

With that said, it is trading right at its 200-day moving average — a key support level for most stocks. So it will be interesting to see if it can get a bounce higher from here. If it breaks below that level, it will be a sign for us to exit early.

Our last position for today is Monster Beverage (Nasdaq: MNST).

We grabbed the June $45 call options to benefit from its earnings drift, and this hasn’t played out as expected yet. We know we have a few more weeks for its drift to kick in, with an expected exit date around May 1. But, so far, Monster hasn’t played its part.

Much like Garmin, shares in Monster Beverage have meandered lower — no steep drops, just slow, downward movement. We are down about 30% at last glance, so it’s not as steep as our Garmin trade, but it’s still at a loss.

It’s important to note that broad markets — the S&P 500, Dow Jones, Nasdaq — have, for the most part, followed this trend as well. So it’s likely the overall market that’s weighing on these two drifts.

Regardless, our earnings-based system will still adapt to the market (as I explained here). And as we have more and more data under our belt about each company’s earnings drift, we’ll continue to expand our knowledge — and, as a result, our strategy.

So if a company’s drift doesn’t pan out, eventually that “drift” will no longer be relevant in terms of its consistency — and we will cut it from our list.

Likewise, more drifts will also be discovered.

In fact, I plan to spend the first of every year going back through the most recent data to see if any new companies have worked their way onto our list of stocks. I’ll keep you updated on any that get added or removed.

That’s all for this week.

Again, stay tuned for next week, as there are several possible trades that could come up.

And, as always, if you have any questions or comments, feel free to send them to earningsdrift@banyanhill.com.


Chad Shoop, CMT
Editor, Earnings Drift Alert