Last week’s Stone-Cold Earnings Trade Lock of the Week was a put option on ValueClick (VCLK). Those who bought put contracts at or near the close of trading before earnings were released did so at approximately 70 cents per contract.
After the close of trading, ValueClick announced results that included weak guidance and soft revenues. The next day shares sank. The value of the recommended put contract soared to more than $5 per contract.
That’s up 600%, thank you very much!
The market dynamic that created the ValueClick opportunity remains intact. That is to say the overall stock market is generally overvalued. At the same time corporate profits and expectations of future growth have reached a ceiling.
The resulting adjustment can be quite sharp, with earnings reports being the trigger.
On Friday stocks did take a step back after trading sideways for much of the week. Shares sank after the jobs report disappointed investors. Chalk it up to more evidence in support of a tepid economic advancement at best.
It will take much more steam to propel stocks higher, and I simply do not see any facts to support such an argument. On the flip side is the risk-on trade that keeps investors flocking to stocks helping to keep prices high.
As long as that remains the case, there will be many more Stone-Cold Earnings Trade Lock of the Week opportunities.
They say you should make hay when you can. This is one of those times.
Here are five companies reporting results this week, including my next big Stone-Cold Trade Lock of the Week winner: