Wednesday, April 28, 2010

Aetna (AET) - Trading Earnings Patterns

AET is trading 30.59 with earnings BMO tomorrow. The LIVEVOL™ Pro Summary is below.

With earnings coming up I looked at the trends (vol). It turns out that selling the front month ATM straddle the day before earnings and buying it back the day after has won 6/7 times. Further, the one loss was the smallest absolute move of all. The stats are included (click to enlarge).

The Options Tab demonstrates the current prices - the ATM front straddle has fair value of ~ $2.49 with nice and tight/liquid markets.

The Earnings & Dividends Tab for the last 7 quarters are included. First the most recent three quarters (all wins; click to enlarge):

What we're lookin' at:
(1) The top ROW is AET stock price 5 trading days before earnings through 5 trading days after.
(2) The second ROW are the front 2 month ATM straddles for the same period - focus on purple - the front month.
(3) The third ROW is the implied vol for those straddles - focus on the red - the front month. NOTE: The red line always collapses after earnings - this is called the vol crush after earnings.

And then the four prior to that (3 wins/1 loss click to enlarge).

One word of caution - AET is an insurer - so you never know about the crazy news...

This is trade analysis, not a recommendation.

Legal Stuff:

No comments:

Post a Comment