Trade Findings and Adjustments 01-26-23
Keve Bybee – firstname.lastname@example.org
What are we looking at?
- Earnings and rate hike decision on Wednesday
- If we get a .25% rate hike market will continue higher
- If we get a .50% rate hike the market will be surprised as it expects a .25% hike and stocks may fall
- My feeling is that we will get a .50% bps hike as inflation hasn’t come down enough
- Feb, March, May rate hikes coming up
BA – 1/25 earnings report
- Missed numbers BUT sold a lot of planes
- Should be cash flow positive this year
How do we protect for earnings?
- Usually put protection on around 2 weeks before earnings unless the stock is having a great pre earnings run. Just to avoid volatility causing expensive options prices.
- We will buy around 5 – 6 weeks of time to avoid time decay of options expiring in that month.
- Typically buying ATM strike prices
- Decide if we need to “roll up” the puts to higher strike prices if the stock has run up, or let them run.
- IF we roll up, the math has to make sense: we need to be gaining more dollars per share that we are protecting than we are spending to buy a higher strike price.