Trade Alert: New Buy in Tyson

This morning, Tyson Foods (NYSE: TSN) announced earnings that missed by nearly 20% of analysts’ estimates, causing the stock to plunge 10% at today’s opening bell.

That was enough to surpass our parameters for making a trade.

But it’s not the kind of trade you might expect.

As with some other earnings drifts we’ve discussed recently, even though the stock is down — that doesn’t mean it’s going to keep going down. In fact, we want to get in now with call options because this type of trend has a history of reversing — and soon.

Since 2005, this type of trend (an earnings miss followed by the stock’s plunge) has actually been a buying opportunity for shares of Tyson. As we’ve seen in our research, the stock will rally soon enough: We saw gains ranging from 1% to 44% within about two months’ time — so there is a wide range of returns we could expect. And each could lead to significant profits when we utilize call options.

So here’s your action to take:

Action to Take
Buy Action to Take
Stock: Tyson Foods Inc. (TSN)
Option Type: Call Option
Expiration: Jan-20-2017
Strike Price: $55
Option Symbol: TSN170120C00055000
Action: Buy to Open
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: $4.30
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 $4.30.
Once this order is filled, place the following order:
Sell Action to Take
Stock: Tyson Foods Inc. (TSN)
Option Type: Call Option
Expiration: Jan-20-2017
Strike Price: $55
Option Symbol: TSN170120C00055000
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.

Before I sign off, I just want to say thanks once more for continuing to reach out. I received a lot of great feedback from you over the weekend in response to the note I sent on Saturday.

I’m glad to see that many of you are having fun with the process.

Here are some of the notes I received recently:

  • Justin H. wrote: “Really enjoy the ‘quick hit’ strategy. Like options trading in general, and it’s always fun when you’re making money.”
  • Todd L. wrote: “So far this trading strategy is very, very good. I am currently trying several strategies by other so-called experts and without a doubt, your ‘earnings drift’ strategy is the best. It is by far the most consistent.”
  • Ed S. wrote: “The service has been without a doubt the easiest to execute and the trades fully understandable.”

Thanks again for taking the time to write in.

That’s all for now. But you’ll hear from me at least one more time this week with a mailbag issue and a follow-up survey on today’s new buy.

Until next time, good trading…

Jeff Opdyke
Editor, Earnings Drift Alert