Trade Alert: Buy Calls in Western Digital

Today, we have our third profit opportunity this week.

After yesterday’s closing bell, Western Digital (Nasdaq: WDC) posted its results for the second quarter — and investors loved it.

The company, a hard-disk and memory-chip maker, handily beat expectations, and the stock popped 7% before the market even opened this morning.

Based on the research we’ve conducted, we know the sweet spot to own calls on this stock is from now till about one month out.

As a reminder, we played this trend once before in our beta test, and the results were not ideal since it was stopped out for a loss. However, I still feel this is a strong earnings trend. This trading scenario came up in our backtesting six times, and only one time did it deliver a loss. The other five times, it saw gains of 3.5%, 7.5%, 7.8%, 9% and 13%.

And since we use options, our gains could be magnified if the stock repeats that type of climb. So, to capitalize on this drift, we’re going to grab the June 16, 2017 $90 call options.

Here’s your action to take:

Action to Take
Buy Action to Take
Stock: Western Digital Corporation (WDC)
Option Type: Call Option
Expiration: Jun-16-2017
Strike Price: $90
Option Symbol: WDC170616C00090000
Action: Buy to Open
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: $4
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 $4.
Once this order is filled, place the following order:
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 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.

Now, before I go, a quick update on our recent trade in Edwards Lifesciences Corporation (NYSE: EW): The June 16, 2017 $105 calls were filled at $5.78 yesterday, so we’re officially tracking this position in the portfolio.

In fact, it’s already up about 20% in just a day, so if you were able to jump into this trade, well done. I’ll be sure to alert you if our orders to sell half the position for a 50% gain are triggered. In the meantime, make sure you have those sell orders in place so you’ll be ready to benefit from Edwards’ updrift.

That’s all for today.

This was a busy week, and next week could be just as busy. We still have over a dozen companies on our watch list that will be reporting earnings, so there could be several trades. Keep an eye on your inbox for the next one. I don’t want you to miss out.

Regards,

Chad Shoop, CMT
Editor, Earnings Drift Alert