Trade Alert: 3 Actions to Take

I have a new trade for you today.

In addition, I have an update on our latest recommendation, Autodesk (Nasdaq: ADSK), and we’re increasing our stops on two positions to preserve capital.

A few companies on our watch list reported earnings over the last 24 hours, and one of those triggered a new trade for us: Best Buy (NYSE: BBY).

The retail giant, known for electronics, TVs and home appliances, reported first-quarter earnings that blew past expectations. Its earnings per share were 50% higher than analysts had expected.

This helped send the stock up 12% early this morning, and we know, based on the historical research, that this momentum will propel the stock even higher over the next three weeks.

We already played an earnings drift on Best Buy once — back in November. That trade handed us a gain of 50% on the first half in just one week, and we closed out the second half at a 9% gain, leaving us with an overall return of 29% in just two weeks.

This drift has also appeared more than 10 times since 2005, and it generates an average return of 14% — which could easily hand us a triple-digit gain in the options market.

To benefit from the drift, we’re grabbing the July 21, 2017 $60 call option.

Here’s your action to take:

Action to Take
Buy Action to Take
Stock: Best Buy Co. Inc. (BBY)
Option Type: Call Option
Expiration: Jul-21-2017
Strike Price: $60
Option Symbol: BBY170721C00060000
Action: Buy to Open
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: $2.50
Trade Deadline: If your order is not filled by my next dispatch, I will update you on the trade.
Note: Do not place a market order. Set the limit order at $2.50.
Once this order is filled, place the following order:
Sell Action to Take
Stock: Best Buy Co. Inc. (BBY)
Option Type: Call Option
Expiration: Jul-21-2017
Strike Price: $60
Option Symbol: BBY170721C00060000
Action: Sell to Close Half
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: Whatever nets you a 50% gain.
Trade Deadline: Keep this order open until it is filled or canceled.
Note: This second order will allow us to collect a 50% gain on half of our position in the event that a quick move happens before I can get a trade alert out to you.

Trade Recap: Autodesk

Last Friday, I sent you an alert to grab call options on Autodesk (Nasdaq: ADSK).

That order — the June 16, 2017 $110 call option — was filled, and we are officially tracking the position with an entry price of $4.35. That’s based on the average price from the moment the alert went out to one hour later.

Increase Stops on WDC and CAT

Last Thursday, we locked in an overall gain of 35% in Edwards Lifesciences, and we also placed stops on Western Digital (Nasdaq: WDC) and Caterpillar (NYSE: CAT).

Since then, our returns in those positions have improved, and we are now down just 15% in both.

So we can increase our standing stop orders. We’re currently preserving a 75% loss, but we’re going to ratchet that up to a 30% stop-loss.

Here are your actions to take.

Based on our entry price of $3.07 on Western Digital, our official stop will be placed at $2.15. But be sure to place yours at whatever nets you a 30% loss.

Action to Take
Sell Action to Take
Stock: Western Digital Corporation (WDC)
Option Type: Call Option
Expiration: Jun-16-2017
Strike Price: $90
Option Symbol: WDC170616C00090000
Action: Sell to Close
Order Type: Stop-Loss Order
Duration: GTC (Good ‘Til Canceled)
Stop Price: Whatever nets you a 30% loss.
Trade Deadline: Keep this order open until it is filled or canceled.

For Caterpillar, our official entry price was $3.30, so our official stop price will be $2.31. Be sure to place yours at whatever nets you a 30% loss.

Action to Take
Sell Action to Take
Stock: Caterpillar Inc. (CAT)
Option Type: Call Option
Expiration: Jul-21-2017
Strike Price: $105
Option Symbol: CAT170721C00105000
Action: Sell to Close
Order Type: Stop-Loss Order
Duration: GTC (Good ‘Til Canceled)
Stop Price: Whatever nets you a 30% loss.
Trade Deadline: Keep this order open until it is filled or canceled.

That’s all for today.

We only have one more opportunity for a trade, and that’s not until next Wednesday. I’ll let you know if it triggers a new trade for us. Otherwise, we will be focused on managing our existing positions for the best returns.

Regards,

Chad Shoop, CMT
Editor, Earnings Drift Alert