3 easy trades on earnings reports this week

These stocks could make sharp moves in the next few days, meaning well-timed action can reap big rewards.

By Traders Reserve Jan 20, 2014 3:03PM
Caption: Coach Inc. store in New York
Credit: (© Scott Eells/Bloomberg via Getty Images)By Jamie Dlugosch

 

Within a sideways market, there are some huge trading opportunities.


Already we have seen stocks like Sears (SHLD), SodaStream (SODA) and Best Buy (BBY) make dramatic moves. What stocks will be next?


Earnings season is here and that means more big moves are on the way. With my P/E Gap approach to analyze stocks, you can anticipate those moves, allowing you to place a well-timed option trade for big bucks.

 

The returns can be spectacular and in a short period of time, too. How about doubling your money in less than 24 hours by simply owning "put" or "call" options of companies reporting results?

 

That's what trading earnings can do for you if you are on the right side of the trade.

 

So how do you get on the right side of the trade?  That’s where the P/E Gap comes in. By identifying so obviously overvalued or undervalued stocks, you can get an edge up on the market before the news is released.

 

Last quarter we made out like bandits trading earnings. Krispy Kreme (KKD) and DSW (DSW) were the big winners.  


This week we have a full roster of candidates for double-your-money trades. Here's a snapshot of three stocks that should move significantly after they report results in coming days:

 

Advanced Micro Devices (AMD)

The biggest risk you can take in the market today is a stock on the border of profitability. That's the situation with Advanced Micro Devices. The company is set to post a loss of 12 cents per share in 2013 with expectations of a small profit of 13 cents per share. In other words, AMD could make money or it could lose money and yet the stock trades for 32 times 2014 estimated earnings. That's sheer insanity if you ask me.

 

With Intel (INTC) reporting disappointing results, AMD might collapse altogether. This one is an easy "put" to buy before the company reports results on Tuesday. A 20 percent drop in share price is not out of the question. If so you will potentially triple your money on this options trade.


Delta Air Lines (DAL)

In the market landscape today, you'll notice a few key themes that are working very well. One of those themes is to be long airline stocks. They were some of the biggest winners last year, but that was last year. While the industry has indeed changed, its history is rich with disappointment.


On Tuesday, Jan. 21,  Delta Air Lines reports results. Analysts expect the company to make $3.13 per share in 2013, but that number drops to $2.55 in 2014. For those falling profits, you get to pay 12 times 2014 estimated earnings. I don't think so. The risk on this one is to the downside. I would buy a "put" in advance and look to cash in after a disappointing announcement.


Coach (COH

It should be no secret that retail struggled in the fourth quarter. The sector has seen downgrades and lower-than-expected sales results galore. Among retailers there are both winners and losers. The winners are getting all the love; Michael Kors (KORS) would be a great example of that.


The losers are being sold hard like Best Buy (BBY). On Wednesday, you can add Coach to the list of stocks that will be sold off on poor results. Analysts are looking for 10 percent profit growth in 2014. At current prices, shares trade for 14 times 2014 estimated earnings. It should be a single-digit multiple of earnings and just might be after a disappointing report. I would buy "put" options here before the company releases results, for a quick money doubling trade.

 

More from Traders Reserve


 

11Comments
Jan 20, 2014 7:21PM
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Telling people who get their investing advice from MSN to gamble on short term options. Genius.
Jan 21, 2014 9:07AM
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tricks  i would like to see the stocks  gain  one  day  with more then 1 positive .  everyday  china  russia  a  feds  ect  ect  never any two  things  that sounds like they are grabbing  at  straws

Jan 20, 2014 9:34PM
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Ok, great, I'll put all my family's money in this and borrow some too. This will be great. Thanks for telling me how to do it. Sounds easy.
Jan 21, 2014 11:17AM
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Cold and -5 Deg. at the bottom of the Mountain this morning and in this Hollow. So I will say a Hail Mary for all you Hardy Souls and your families. So, let us get back to work.
Jan 21, 2014 10:29AM
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WOW, the person who wrote this article sure needs some classes in investing and trading since AMD is the best selection and is in fact going to $12 this year and $7 soon. AMD is back and in a big way. Great way to make money. The others won't bring in the percentage gains that AMD will but then again, I was trading AMD when it became a traded company and writer might not have been born yet.
Jan 21, 2014 7:00PM
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Let's see:

Intel reported earnings and the stock dropped 1%, not 20%. So you lost money on your options trade.

Delta is up over 3%.

Let's see how Coach does tomorrow but you're not doing so well.

 

Jan 20, 2014 6:26PM
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and if your wrong and the stocks go up or remain about the same you'll lose, very fast .....just a small disclaimer on behalf of the author .
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