4 Stocks to Trade on Big Earnings Expectations

Welcome to Rude Awakening for Wednesday, December 16, 2020.

We opened up this morning strong.

Every index is pushing to all time highs once again, despite some of that weakness we have been talking about lately.

IWM remains the monster of them all, still pushing up so far overextended on all technical indicators. And yet, it just continues to go higher.

Positive Market Drivers

Markets opening up higher this morning  is unsurprising given all the positive news driving markets right now.

The top news item is the Fed minutes coming out today.

We know what they are going to say — they have remained staunch about being accommodating to market needs as the pandemic continues — but we don’t know whether or not their conclusions will disappoint the markets.

We don’t know if it will be enough to keep the markets buoyant.

There is also the bipartisan deal hoping to push through a new stimulus deal before the congressional recess.

And, the vaccines of course are officially rolling.

Again, a lot of positive news going into the marketplace right now.

A big factor is that stimulus. The markets are expecting that stimulus to come through before the recess.

So, if we don’t get it? That would cause a major blow to markets across the board.

In any case, let’s get to 4 new trade ideas for you…

Big Moves Expected on These 4 Earnings Announcements

First up, there’s Rite Aid Corporation (RAD), reporting earnings before market open tomorrow morning.

This is a billion dollar company, and the implied move for tomorrow based on options pricing is about 15%, which is 12% LESS than what would normally happen when RAD announces earnings, which could make for a credit trade opportunity using options.

Next, one of my favorite companies and products: Herman Miller, Inc. (MLHR). I am literally sitting in a Herman Miller chair as I write!

The stock has been absolutely perfect from a technical standpoint, as well. A $2.5 billion company, they are reporting earnings today after the closing bell. There is a 10.9% implied move on these options, compared to the usual 7%. This makes for higher premiums in these options if you want to look at opportunities there for options selling…

Next we have a smaller company, Uxin Limited (UXIN), reporting earnings tomorrow morning before market open. Options now are implying an 8% move, which is 5% more than what is typically expected. It is positioned quite nicely for an upward move tomorrow.

Last up, Lennar Corporation (LEN), a $23 billion company. This is one of my favorites to trade. They will report earnings after the bell today. Implied move is looking to be 6.2%, which is 4.5% more than the usual expectation. So, another expensive set of options there, for any of you credit spread sellers out there.

Lots of really rich options premiums in most of these.

And with that, we’ll wrap for today.

Have a great trading day, folks.

We’ll talk to you tomorrow.


Scott Stewart

Scott Stewart
Editor, Rude Awakening

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Scott Stewart

Scott Stewart has been trading for decades. He has acted as an analyst and educator on the stock market for just as long. As your Rich Dad's Weekly Cash Flow analyst, Scott works tirelessly to ensure you know everything you need to do when entering into new positions, and adjusting trades as you go along....

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