This morning, Garmin (Nasdaq: GRMN) reported earnings that failed to impress investors.
As a result, the stock dropped this morning, triggering our stop-loss. If your close orders have not been filled for any reason, go ahead and exit Garmin at the market since I’m no longer following this position.
The option opened this morning at $0.86, so that is our official exit price. This marks a loss of 65%, which is painful. The position was starting to turn in our favor prior to earnings, but it went south today.
It’s never fun taking a loss, and I understand that losses of 50% or more are steep to take. But we have a system in place that has proven time and time again to work out nicely, as it is currently with Lam Research (Nasdaq: LRCX), which is up 190% as we continue to increase our stops behind it.
Also, our strategy to cut losses at 75%, while steep, has proven to be a point of no recovery — meaning that we cut losses to preserve capital on positions that would otherwise head on to a 100% loss.
Most of our other open positions have over a month left until we will look to exit, except for our put on Mattel (Nasdaq: MAT) and call on Western Digital(Nasdaq: WDC) — both are down just 15% and 30%, respectively. There are still several weeks left in both of those drifts, so we have plenty of time for those to turn around.
I’ll continue to keep you updated on our other positions as well as new opportunities when they come up.
So far, we have entered five trades this earnings season, but we can expect several more before the season is over. There are more than a dozen potential trades in the next week, so we could see a trade any day now.
That’s all for today.
Chad Shoop, CMT
Editor, Earnings Drift Alert