HYTM was listed as releasing it's earnings yesterday, November 5. Instead, their expected earnings release date was pushed back until November 12. I think this is a phenomenon pretty much unique to small companies. I can't imagine Google, IBM, or Apple getting away with a week's delay in releasing financial information.
In fact, HYTM hasn't really gotten away with it. The past couple of days have seen HYTM drop down to $4.71 so far. Incidentally, this puts me fairly deep in the red. We'll just have to see what the implied volatility does after earnings. It may still be worth holding on to if I can still get >5% a month in options premiums. Or perhaps earnings will beat analyst estimates and I'll get my shares called away after all.
In other news, Garmin (GRMN) is down below $100 again. I think if I had $10,000 or multiples thereof, I would buy some GRMN shares and write more out of the money covered calls. Garmin seems to be down on fears of a TeleAtlas bidding war with TomTom (TOM2.as). However, I see this as both a good move and temporary. Garmin has about $1B cash on hand and is worth >$20B, while TomTom probably has less on hand and is worth ~$6.3B.
Garmin used to be in a position of having TeleAtlas in the hands of TomTom and Navteq in the hands of Nokia, meaning they might face an increase in mapping costs. Garmin has either put TomTom in this position, or forced them to go deeper in debt by upping the price of TeleAtlas. If Garmin gets stuck buying the company, they at least have the advantage of being able to afford it, and they have a longer history of acquisitions, which implies to me a better ability to integrate TeleAtlas. It will be interesting to see how this develops. Unfortunately, I'll be watching from the sidelines.
Showing posts with label earnings. Show all posts
Showing posts with label earnings. Show all posts
Tuesday, November 6, 2007
Thursday, August 16, 2007
Earnings Strategy: The Aftermath
So, Earnings for Google (GOOG), Apple (AAPL), Garmin (GRMN), AMD (AMD), Amazon (AMZN), and Akamai (AKAM) were all done by August 1. I've delayed writing about my findings because I've been highly distracted by Harry Potter. I'm done with that now, though, so here it goes.
Even though GOOG moved down 30-40 points after earnings, no reasonable combination of 540-560 strike price options make money. For AAPL, I tried looking at further out of the money options. Once again, the movement wasn't large enough to make money. GRMN was interesting in that it had a spike up after earnings, but then kept rising another 10 points. I don't think I would have made money off the initial movement, though. I didn't do any real analysis of AKAM, but after the fact, I think it's movement of 20% would have resulted in some profit. AMD barely moved at all (meaning a large loss in strangle options), which I found surprising given it lost another $600M last quarter.
So, what did I learn? First, I learned a bit of new terminology. When you buy a put and a call option at the same strike price, that's called a straddle. When you buy a put and a call, both out of the money, it's called a strangle. Second, I learned that a very large price change is required to make either of these work through earnings. Third, my previous talk of increased volatility was mostly wrong. It turns out that statistical volatility will indeed increase, but implied volatility (IV) will plummet. Thus, options tend to lose half their value right after earnings, everything else being equal. Bummer.
In the future, then, I'm going to analyze longer-term options, which tend not to have such high IV shifts because of earnings. I'm also going to look at what is required to write both a put and call option to take advantage of the IV crush. Normally, to write a call, you have to have the 100 shares in your account. To write a put, you have to have the cash available to buy 100 shares at the strike price. I'm not sure what assets I need, exactly, to buy both, as I'd think they'd cancel each other out to some extent.
For now, my overall earnings strategy is GET THE HELL AWAY! Things are just too wild around earnings season. Now I just need the overall market to improve so I have money to invest again.
Even though GOOG moved down 30-40 points after earnings, no reasonable combination of 540-560 strike price options make money. For AAPL, I tried looking at further out of the money options. Once again, the movement wasn't large enough to make money. GRMN was interesting in that it had a spike up after earnings, but then kept rising another 10 points. I don't think I would have made money off the initial movement, though. I didn't do any real analysis of AKAM, but after the fact, I think it's movement of 20% would have resulted in some profit. AMD barely moved at all (meaning a large loss in strangle options), which I found surprising given it lost another $600M last quarter.
So, what did I learn? First, I learned a bit of new terminology. When you buy a put and a call option at the same strike price, that's called a straddle. When you buy a put and a call, both out of the money, it's called a strangle. Second, I learned that a very large price change is required to make either of these work through earnings. Third, my previous talk of increased volatility was mostly wrong. It turns out that statistical volatility will indeed increase, but implied volatility (IV) will plummet. Thus, options tend to lose half their value right after earnings, everything else being equal. Bummer.
In the future, then, I'm going to analyze longer-term options, which tend not to have such high IV shifts because of earnings. I'm also going to look at what is required to write both a put and call option to take advantage of the IV crush. Normally, to write a call, you have to have the 100 shares in your account. To write a put, you have to have the cash available to buy 100 shares at the strike price. I'm not sure what assets I need, exactly, to buy both, as I'd think they'd cancel each other out to some extent.
For now, my overall earnings strategy is GET THE HELL AWAY! Things are just too wild around earnings season. Now I just need the overall market to improve so I have money to invest again.
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