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Posted December 16, 2020

Scott Stewart

By Scott Stewart

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 dont know whether or not their conclusions will disappoint the markets.

We dont 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 dont get it? That would cause a major blow to markets across the board.

In any case, lets get to 4 new trade ideas for you

Big Moves Expected on These 4 Earnings Announcements

First up, theres 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, well wrap for today.

Have a great trading day, folks.

Well talk to you tomorrow.


Scott Stewart

Scott Stewart

Editor, Rude Awakening

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