For us non-Wall Street traders, I define a whale trade as a put or call option contract that appreciates by more than 300% — in one day.
Now that earnings season has begun, it’s officially whale-hunting season. When companies report earnings, big moves can happen in an instant. The landscape is rich for making a whale trade.
Last quarter, there were dozens of whales to reel in. At the top of the list was Netflix (NFLX). The video rental company caught the market with its pants down. As a result of a massive earnings surprise, its shares soared 50% in the day of trading after the news was released.
Call options did even better, with gains approaching 1,000%.
Of course whale hunting is never easy and the risks are large. That said, for the fun money in your portfolio, why not throw in a line or two? Using the option market you can play the game for as little as a few hundred dollars.
Catch the whale and those hundreds can turn into thousands.
Now that Alcoa (AA) has reported results, it’s time to take the fishing boat out to sea. I’m in the crow’s nest on the lookout for whale trades that you can make this week.
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Here are three to consider: