Thursday Update: Trade Management


YELP is on the verge of reversing Long. Rather than taking a Long position, we will replace YELP with PYPL going forward. The reason for any replacement is based first and foremost on a superior trend profile, i.e., less whipsaws and more opportunity for extended trends in either and both directions. Accordingly, PYPL is in, YELP is out. 



Both the Intermediate and Short-Term portfolios are currently short AAPL, the former with the April $170 Puts and the latter with the March $170 Puts. After today's close, AAPL will be reporting earnings. Over the past 12 months in 3 out of 4 past earnings announcements AAPL has gapped up at least 5% the next morning. The 4th one was essentially flat. While "essentially flat" is good for our trading system, gaps can be either stellar, or a disaster, depending on the the direction of the signals and gaps. 

In other words, holding either long or short going into earnings is tantamount to a flip of the coin. Everyone's risk tolerance is different, so there is no one right or wrong way to trade earnings. Both positions are profitable going into AAPL's announcement so taking at least some off of the table is so "prudent" that I have to recommend it. Our tables and track record try to chronicle an objective and "no exogenous considerations need apply" trading system and have no choice but to hold through earnings, for better or for worse. 


AMGN also reports after the close and the same admonition applies. 


Market Update

I haven't a clue.

(Subject to change.)