How to Trade Options Around Company Earnings....Example Apple AAPL

The hallmark of a professional option trader is the ability to use a wide variety of trade structures in order to exploit opportunities to profit from specific situations the market presents. One of the opportunities routinely presented multiple times yearly is the impending release of earnings.

Underlying the logic of earnings trades is the stereotypic pattern of increasing implied volatility of options as earnings approach. This pattern is so reliably present that experienced options traders can recognize the approximate date of an impending earnings release by simply perusing the implied volatility of the various series of upcoming options.

As a real time example of this phenomenon, consider the current option chain of AAPL which will report earnings after the market closes on Wednesday, January 23rd.....Let's look at how this sets up.


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Schlumberger Releases Fourth Quarter and Full Year 2012 Results

Schlumberger (NYSE:SLB) today reported full year 2012 revenue of $42.15 billion versus $36.96 billion in 2011.

Full year 2012 income from continuing operations attributable to Schlumberger, excluding charges and credits, was $5.58 billion, representing diluted earnings per share of $4.17 versus $3.61 in 2011.

Fourth Quarter Results

Fourth-quarter 2012 revenue was $11.17 billion versus $10.61 billion in the third quarter of 2012, and $10.30 billion in the fourth quarter of 2011.

Income from continuing operations attributable to Schlumberger, excluding charges and credits, was $1.44 billion, which was flat sequentially, and represents a 3% decrease year on year. Diluted earnings-per-share from continuing operations, excluding charges and credits, was $1.08, the same as in the previous quarter, and $1.10 in the fourth quarter of 2011.

Schlumberger recorded charges of $0.06 per share in the fourth quarter of 2012 versus $0.02 per share in the previous quarter, and $0.06 per share in the fourth quarter of 2011.

Oilfield Services revenue of $11.17 billion increased 5% sequentially and 8% year on year. Oilfield Services pretax operating income of $2.2 billion increased 1% sequentially and was flat year on year.

Read the entire Schlumberger earnings report


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Monday Price Analysis.... Metals, Crude Oil, U.S. Dollar, Bonds and the SP 500

The U.S. stock market is closed today for Martin Luther King, Jr. Day. So we do not expect much price action to take place on the Canadian or futures market today. But we'll still be watching the markets, let's be ready to trade Tuesday morning!

Pre-Market Analysis Points

*  Dollar index is giving mixed signals this week. Short term chart looks bullish for another couple of days but overall it is trading within a large bear flag and near resistance.

*  Crude oil is trading lower by -0.50% but remains in a strong uptrend and bull flag. $97-$98 looks like the next upward thrust target.

*  Natural gas is trading higher 0.87% touching our upside target of $3.60 this morning. It could keep climbing to $3.70 which is the next target but it looks as though its ready for a pause.

*  Gold and Silver are trading flat. Last week they held up at resistance but have yet to breakout. They could do it this week but until we the trend shifts with volume to support the move and miners to also show strength I will remain on the sideline.

*  Bonds are trading flat and giving off mixed signals much. The 60 minute chart is bullish with a bull flag, while the daily chart is bearish.

*  SP500 index remains in a bull market grinding its way higher each week without a decent pausepullback to get long. Technically we could see a 3-4% pullback any day and the market would remain in an uptrend.


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John's Webinar Thursday Night was Amazing.....Here's the Recording

John Carter pulled out all the stops in Thursday night's options webinar....shared his BEST trading trick and even gave a trade that, if you took it on Friday, would have been money in the bank.

Watch recording HERE NOW


You even got a glimpse at his ACTUAL account and trades he's ACTUALLY in. Here are a few details you missed:


... his 3 favorite options trading strategies,
... how to find high probability trades,
... how to manage options trades,
... his trading rules for doubling his $500,000 account
... and more.

Click here to watch it now!

See you in the markets,

Ray C. Parrish
President/CEO The Crude Oil Trader

Weekly Technical Take - U.S. Dollar, Crude Oil, Natural Gas, Gold, Silver, Bonds and the SP 500 index

Here's COT contributor Chris Vermeulens technical take on these markets including the U.S. Dollar, crude oil, natural gas, gold, silver, bonds and the SP 500 index........

*    Dollar index 4 hour chart is forming a bear flag. Until the lower blue support line is broken the flag will continue higher.

*    Crude oil has a big pop yesterday as it continues up its support trend line. It looks as though it may take a run at the $100 per barrel level over the next 1-2 weeks.

*    Natural gas had bullish inventory numbers yesterday sending the price sharply higher. It tagged our $4.50 resistance price but could not close above it. This morning it is trading above that level and may confirm a breakout.

*    Gold continues in a clear down trend with high volume resistance, down trend line and a moving average holding it down. It seems everyone is turning bullish here on gold, but in my contrarian view that is signaling another short term top. Stick with the trend until proven wrong.

*    Silver is trading similar to gold. Still in a down trend but is much more volatile.

*    Bonds have been pullback since the December and have formed a falling channel. Price remains bearish which is actually bullish for the stock market.

*    SP500 index continues its uptrend but is trading at a 2% premium above my key support/trend moving average. The SP500 has the potential to drop 2-4% at any time and if so we will be looking to get long with the overall trend.

Click here to see all the charts and more details on all of these trades

 

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Schlumberger Declares 13.6% Increase in Quarterly Dividend

The Board of Directors of Schlumberger Limited (NYSE:SLB) today approved a 13.6% increase of the quarterly dividend.

The increased dividend of $0.3125 per share of outstanding common stock is payable on April 12, 2013 to stockholders of record at the close of business on February 20, 2013.



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As Supply Glut Eases, Gulf Refiners Likely to Benefit

The expanded Seaway Pipeline, along with other new crude shipping capacity, marks a new era for the U.S. oil industry, soon flooding the Gulf Coast with light, sweet grades and signaling the region's impending disconnect from the North Sea benchmark Brent, according to Platts Oilgram News.

Earlier this month, the Seaway Crude Oil Pipeline Co. completed an expansion that boosted crude capacity to 400,000 barrels a day, nearly triple previous levels, between the Cushing, Okla., storage hub and the Texas Gulf Coast. Last May, the pipeline's inland flow was reversed amid efforts to address a glut in the central U.S.

The Seaway Pipeline expansion "allows Gulf Coast refiners to participate in the raw material advantage that we’ve seen in the Midwest," industry consultant Andy Lipow told Platts Oilgram News. "I anticipate seeing Gulf Coast refiners running high operating rates, [which will] translate the crude oil surplus into a petroleum products surplus, given the stagnant demand for refined products in the U.S.," he added.

Refining margins along the Gulf are expected to improve with the influx of "advantaged" crudes, but eventually regional crude prices will come under pressure from the new supply, analysts said. The WTI-Brent spread narrowed sharply earlier this month, as the Seaway expansion renewed market optimism that additional export capacity will help cut heavy stockpiles at Cushing.

Read the entire report
 

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Kinder Morgan Reports 4th Quarter Earnings KMP KMR KMI

Kinder Morgan Energy Partners (NYSE: KMP) today increased its quarterly cash distribution per common unit to $1.29 ($5.16 annualized) payable on Feb. 14, 2013, to unitholders of record as of Jan. 31, 2013.

This represents an 11 percent increase over the fourth quarter 2011 cash distribution per unit of $1.16 ($4.64 annualized) and is up from $1.26 per unit ($5.04 annualized) for the third quarter of 2012. KMP has increased the distribution 46 times since current management took over in February 1997.

Chairman and CEO Richard D. Kinder said, “KMP had a strong fourth quarter and a very successful year overall. We will distribute our budget of $4.98 per unit for the full year, which represents an 8 percent increase over the 2011 distribution of $4.61 per unit.

KMP also produced cash in excess of our distribution target of approximately $30 million. For 2012, all five of KMP's business segments recorded higher results than in the previous year and generated $4.384 billion in segment earnings before DD&A and certain items, a 20 percent increase from $3.639 billion in 2011.

Summary: Quarter 4 EPS of $0.61 misses by $0.03. Revenue of $2.51 billion beats by $0.06.

Read the entire Kinder Morgan earnings report


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Is it an MLP that Icahn is Really After in Transocean?

Carl Icahn’s new stake in Transocean Ltd. (RIG) may raise pressure on the world’s largest offshore driller to put some of its rigs into a tax advantaged partnership as the billionaire seeks to boost his investment’s value.

Transocean’s announcement this week that Icahn bought 1.56 percent of its shares and sought regulators’ permission to own more than 3 percent stirred a debate in the investment community as the activist investor known for shaking up companies remained silent about his intentions. He’s jumping in less than two weeks after Transocean agreed to pay the U.S. $1.4 billion to settle its liability in the 2010 Gulf of Mexico oil spill.

With the company already in turnaround mode, the shares have led peers with a 34 percent gain over the past year, some investors and analysts said they expect the 76 year old to push for Transocean to create a master limited partnership, or MLP, to raise cash for the parent company and spur growth with its tax free structure.

It would be the second drilling rig partnership after Stavanger, Norway based Seadrill Ltd. (SDRL) spun off assets to create Seadrill Partners LLC (SDLP) in October.....Read the entire Bloomberg article.


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Progress Energy Chooses TransCanada to build new LNG Pipeline

A $5.1 billion natural gas pipeline that will transport liquefied natural gas off Canada's West Coast will be built by TransCanada Corp., the builder of the Keystone XL oil pipeline. Bloomberg reported the Prince Rupert Gas Transmission project could transport up to 2 billion cubic feet of LNG a day from the Montney region in Alberta and British Columbia to an export facility Port Edward, B.C. The pipeline still needs to be approved by the government.

“From a trading perspective, we view today's announcement as an unexpected positive development that should provide support for [TransCanada] shares,” said Pierre Lacroix, an analyst at Desjardins Securities Inc., according to Bloomberg.

Read the entire PennEnergy.com article

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