So why did these and other stocks move so much in one day? Earnings announcements. In simple terms, the companies reported financials that made investors happy. Of course, you could have picked the wrong stock, such as Yelp (YELP), which was down 21.5% today or GoPro (GPRO), which tanked 13% today. In that case, you would have lost a lot, unless you had shorted the stock or owned an option straddle.
It's earnings season, and this is the time of year when many popular stocks can really move. If you can choose the right direction, you can bank bucks.
Or if you use the right option spread, you can make money whether the stock goes up or down. Here is an example. Yesterday, you could have bought the February 6 2015 call and put with a strike price of 41. The call traded around 2.60 yesterday and the put at 2.58, for a total cost for the straddle of 5.18 or $518.
Today, you could have sold the straddle for 6.75 or $675. This works out to a profit of over 30% in one day. What's your total risk? $518. What's your potential gain? Unlimited on the upside and around $4,300 on the downside, in the event a black swan hits the stock.
Now you might ask, what other stocks are coming out with earnings reports in the next week? Here is a list for you, which contains a lot of the stocks that can make big moves depending on their earnings.
February 09, 2015Hasbro (HAS)
February 10, 2015Akamai (AKAM)
Blue Nile (NILE)
Health Net (HNT)
Jive Software (JIVE)
Molson Coors (TAP)
Monster Worldwide (MWW)
February 11, 2015
Cheesecake Factory (CAKE)