Trade Alert: Buy Calls on Tech

We had another 10 companies on our list report earnings between the close yesterday and the open today, and one of those has met our parameters.

F5 Networks (Nasdaq: FFIV), a Seattle-based technology company, reported its fiscal fourth-quarter earnings. It topped estimates by more than 8%, sending shares higher today by more than 10%. Based on our in-depth analysis of how the stock has reacted to positive earnings reports like this in the past, we know now is the best time to buy call options — and we’ll hold them for about two months.

Here’s your action to take:

Action to Take
Buy Action to Take
Stock: F5 Networks Inc. (FFIV)
Option Type: Call Option
Expiration: Jan-20-2017
Strike Price: $130
Option Symbol: FFIV170120C00130000
Action: Buy to Open
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: $7.50
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 $7.50.
Once this order is filled, place the following order:
Sell Action to Take
Stock: F5 Networks Inc. (FFIV)
Option Type: Call Option
Expiration: Jan-20-2017
Strike Price: $130
Option Symbol: FFIV170120C00130000
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.

At last glance, it was trading at $6.85.

Yesterday, we made two trades: We bought calls on Juniper Networks (NYSE: JNPR) and Akamai Technologies (Nasdaq: AKAM) — and we’re officially tracking them in the portfolio.

Both options traded below our limit prices, so we took the average of the initial price after the alert went out and the price one hour later. Our official entry price for the Juniper December $27 call option is $0.78, and we placed a limit order to sell half at $1.20.

For Akamai, our entry price on the November $67.50 call options is $1.92, and we placed a limit order to sell half at $2.90.

Your entry prices may differ slightly, so just remember: Your limit orders to sell half should be at whatever nets you a 50% gain.

Now I’d like to ask you how it went.

In order to make this research service great, your feedback is crucial. It’s why I created this beta test — so that you can tell me how the service works for you.

More specifically, if you chose to follow my recommendations, I want to know how easy it was for you to make the trades, at what prices you got in and what kinds of returns you saw.

So please take a moment to fill out this brief survey below. All of the questions are related to the trade alert I sent you yesterday.

It should take less than five minutes to complete, and it will go a long way toward helping me perfect Earnings Drift Alert.

That’s all for today. We have three more companies set to announce after the bell today and before the market opens tomorrow, so we may close out the week with another trade tomorrow.

If not, you’ll hear from me next week. We have more than a dozen potential opportunities coming up, and it’s likely a few of those will trigger new trades.

Until next time, good trading…

Jeff Opdyke
Editor, Earnings Drift Alert