dani face dani quote

Entering Final ‘Run into Earnings’ Wave…

Hey 5-Star Trader,

“Tuesday Trade” Journal: One of the most important concepts in trading is to review your work, and learn from the good and the bad. Identifying what is working is critical — to do more of it. So, to lead by example, each Tuesday, you’ll get a trade from my trading journal, in which I explain my thought process from start to finish. Trading is all about finding something that works, and applying it over and over again. That’s how you find trading success. So study up on this “Tuesday Trade” and let’s get to work.

This week, I want to talk about my “run into earnings” trade with Best Buy (BBY).

Wave three up next… 

The “run into earnings” season consists of three waves. The first one happens at the beginning of the quarter when banks and Facebook, Amazon, Apple, Netflix, and Alphabet (formerly known as Google) (FAANG) report. This initial wave is typically my favorite because there are no preconceived notions or anticipation going into the quarter. The next wave comes directly afterward when a lot of big tech names report. Historically, this is also the most volatile wave of the three, as it is right after the FAANG reports, and the market tends to pull back during this time.

Now, we have entered the third wave of the “run into earnings” trades. This last wave is saved mostly for retail companies to report their earnings, which is why I had my eye on Best Buy.

Entering with a butterfly…

As with all of my “run into earnings” trades, I like to get into my setup several weeks before the report. So, in consideration of the BBY earnings report releasing on May 27, I entered this trade on April 26 with a target of $125 (BUY +2 BUTTERFLY BBY 100 21 MAY 21 115/125/135 CALL @2.98 limit order). Pictured below is my options chain:

When I entered this trade, the market was chopping sideways, but I was still confident in this setup for two reasons. One, because this was a longer dated trade, and regardless of volatility that week, I knew I would hold onto it because I had given myself a generous 25 days before expiration. This large window will allow me to ride out much of the volatility until an appropriate time to sell.

The second reason was because my Hot Zone Indicator (pictured below) showed me that BBY had a squeeze, with a high-probability “run into earnings” along with a Fibonacci target right at previous highs.

A few days into holding this position BBY hit the 50% retracement zone and was pulling back. Though this was not what I had hoped for, it was still in a squeeze with plenty of time left before expiration. I held strong.

Sell in May and go away’

The common phrase “sell in May and go away” eludes the seasonally weak market conditions that normally start to skulk around near the beginning of May. Because of this notion, despite my large window before expiration, I was still watching closely to see when I could snatch profits on BBY and get out.

Finally, on May 10, I saw my window of opportunity as BBY was meeting my center strike and I quickly closed for profits (SELL -2 BUTTERFLY BBY 100 21 MAY 21 115/125/135 CALL @5.11 limit order). Pictured below is my exit thanks to the Hot Zone Indicator.

Want your charts to look like Danielle’s? Click here to get her Hot Zone indicator and class, where she teaches you how to capture earnings trades through actionable setups.

Up Next...

Assigned… What Now?

Hey 5-Star Trader, One of the reasons I fell in love with options was because, unlike stocks, you can use leverage and risk less money for a larger payout. However, when buying options there is always a chance you will be assigned. While this rarely happens to me, I was recently assigned Campbell’s Soup (CPB) … Read more

Read More

Stock Split For NVDA

Hey 5-Star Trader, “Tuesday Trade” Journal: One of the most important concepts in trading is to review your work, and learn from the good and the bad. Identifying what is working is critical — to do more of it. So, to lead by example, each Tuesday, you’ll get a trade from my trading journal, in … Read more

Read More

Why You Should Target This ‘Danger’ Sector…

Hey 5-Star Trader, Technology is a huge part of our everyday lives and has perhaps become even more important to us this last year when many people had to make changes due to Covid-19. More people are working from home, playing video games, and shopping online than perhaps ever before. But how are these exchanges … Read more

Read More

Subscribe Today!

Want to walk the path to trading success together? Join Danielle’s “Five Star Trader” E-Letter for market insights, tips, tricks, and special bonuses.

Sign Up Now

Free Downloads

Squeeze Checklist

When you find a squeeze, check these boxes to see if you’re looking at a higher probability bet.

Risk Checklist

Before we can make money we must define the rules that define our risk parameters.

High Probability Plays in a Directional Market

Download Danielle's free eBook

10 Steps to Becoming a Successful Trader

Commit to becoming a successful Trader

Strategy Selection Risk Gauge

Danielle focuses on creating a constant stream of income through the selection of trend-following, directional plays.

Upcoming Appearances

Check Back for Upcoming Dates

all-as-seen-on-logos