Trade Alert: Buy Calls in Endo International

I have a new trade for you today. I also have an update on our Monster Beverage stop-loss order, which has been filled.

But first, let’s start with our new profit opportunity.

This morning, Endo International (Nasdaq: ENDP), a global pharmaceutical company, reported earnings for the first quarter of 2017.

It reported a higher-than-expected profit thanks to strong demand for new drug launches. And this sent shares up over 7% before the market opened today.

Based on our historical research over the past 10 years, we know the ideal time to grab call options is right now. This scenario has occurred six times, and in only one occasion did we not see a sizable profit. That lone exception: 2008, during the global financial crisis.

The other five times, the stock climbed 7.6%, 10.5%, 13.8%, 14.1% and 19% — gains that would have been amplified with options.

Then we did a backtest based on the information we collected from our research. This is different than our beta test — in which we live trade the recommendations with you.

In our backtest, we used our trading parameters to test recent drifts — and ran across on opportunity in Endo International. Here, the uptrend narrowly missed our threshold to sell half the position for a 50% gain. It then ended in a loss.

With that in mind, I’ll keep a close eye on this trade. If we see the initial pop following earnings, I’ll look to lock in some early profits instead of waiting for the typical 50% gain to be triggered.

The sweet spot for holding the option is about a month, so we will go with the June 16, 2017 call options.

Here’s your action to take:

Action to Take
Buy Action to Take
Stock: Endo International (ENDP)
Option Type: Call Option
Expiration: Jun-16-2017
Strike Price: $12.50
Option Symbol: ENDP170616C00012500
Action: Buy to Open
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: $1.20
Trade Deadline: If your order is not filled by my next update, I will update you on the trade.
Note: Do not place a market order. Set the limit order at $1.20.
Once this order is filled, place the following order:
Sell Action to Take
Stock: Endo International (ENDP)
Option Type: Call Option
Expiration: Jun-16-2017
Strike Price: $12.50
Option Symbol: ENDP170616C00012500
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.

Stops Hit in Monster

On Friday, I sent you an alert to protect capital in our Monster Beverage call options.

We were waiting for the stock to announce earnings to recoup some of our open losses, and it worked. We were down more than 40%, and we cut that almost in half to a 23% loss.

Our stops were placed at $2.70 (a 20% loss). But since the option first traded below that price to $2.60, that is our official exit price.

We still preserved most of our capital with this trade, and you can put that back to work with our profit opportunity today.

If your stops haven’t been filled yet, go ahead and exit Monster at the market since I am no longer following this trade.

That’s all for today. There are still several more companies on our list that are set to post earnings, and any one of them could trigger a new trade for us. I’ll be sure to alert you immediately when it’s time to take action. I’ll also keep tabs on our portfolio and update you as needed there as well.

In the meantime, if you have any questions about this trade or the portfolio, you can always reach me at earningsdrift@banyanhill.com.

Regards,

Chad Shoop, CMT
Editor, Earnings Drift Alert