AZO Earnings Calendar

Autozone (AZO) is due to have earnings on 5/26/09. Generally I like to have the earnings in the back month, in this case the June expiration cycle. With that in mind I placed a double calendar on 4/20 to hopefully capture some time decay.

4/20 BTO AZO May/Jun 170 CALL $4.45
4/20 BTO AZO May/Jun 155 CALL $4.15

4/29 STC AZO MAY/JUN 170 CALL $5.35
4/29 STC AZO MAY/JUN 155 CALL $4.40

Total profit = 9.75-8.60= $1.15
ROI = 13.37%

This trade worked out primarily from some good timing. IV in the front month dropped several points since I first placed the trade.

Dan Sheridan VIPES criteria

Dan Sheridan follows the VIPES when placing a trade. They are as follow:

-Volatility – IV in the lower range for last 1-1½ years

-Industry – no energy, biotech or “wacko” industries

-Price – Look for too much speed/movement in the underlying. If yes to any below then wait!
o Last week more than a 5% move in 1 direction
o Last month more than a 10% move in 1 direction
o Last 3 months than a 15% move in 1 direction
o Last 9 months more than a 25-30% move in 1 direction

-Earnings – Do not put on in an earnings month unless it’s a stock with IV is low and the last 3 earnings periods had no gap over 3%.

-Skew – Negative Skew < 2% or NO TRADE
Positive Skew < 6% if above investigate why (earnings?)
If a 4-5 point skew develops after the trade take it off ASAP

SPY Bearish Divergence

The bullish run finally looks like it's running out of steam. CCI is now showing a bearish divergence. It may be a great time to place bear call spreads.