Earnings Season is Approaching

January 13, 2021

Not only its monthly options expiration week, but earnings season is upon us!

A few of the big banks report Friday, which should direct the talking heads' attention off politics and back on the market.

As January options continued to be unwound and rolled forward, we should continue to see stocks trade higher.

Now, The CBOE Volatility Index (VIX), aka the “fear” index, is still above our key 15 levels, trading at 22 — indicating that we need to continue to be cautious for a possible shakeout. 

We’ll focus on the signals and ignore the noise.

Now let’s talk shop.

Portfolio Update

We have two positions that are set to expire this coming Friday.

One of them is still in play, but I’ll update if we can salvage it before expiration.

On Monday:

  • Buy-To-Open the América Móvil, S.A.B. de C.V.  (NYSE: AMX) February 19, 2021, $16 call (AMX210219C00016000) up to $0.35 per contract or better, for the day.

Right now, we’re holding:

  • Sandstorm Gold Ltd. (NYSE: SAND) Jan. 15, 2021, $10 call (SAND210115C00010000)

  • Axalta Coating Systems Ltd. (NYSE: AXTA) Jan. 15, 2021, $32 call (AXTA210115C00032000)

  • Altria Group, Inc. (NYSE: MO) Jan. 29, 2021, $43 call (MO210129C00043000)

  • Cloudera, Inc. (NASDAQ: CLDR) Jan. 22, 2021, $15 call (CLDR210122C00015000)

  • Coty Inc. (NYSE: COTY) Jan. 22, 2021, $8 call (COTY210122C00008000)

  • América Móvil, S.A.B. de C.V.  (NYSE: AMX) February 19, 2021, $16 call (AMX210219C00016000)

Let’s keep focused and let the market come to us.

And I’ll be keeping you updated every step of the way.

Your Questions, Answered!

The mailbag is full, so let’s get to your most pressing questions.

“Hi, Joshua,

Our January options are expiring this week — can you explain what would happen if we held them past expiration? - Bill T.

A lot of our trades start out-of-the-money and can quickly become in-the-money.

In that event, we've already closed our position for a big gain.

Here’s why…

If you were to hold a position until expiration, one of two things can happen.

The determining factor is whether the underlying stock is trading above or below our specified strike price at the time of expiration.

If you recall, when the stock is trading higher than the strike price, it’s considered “in-the-money” (or ITM).

When an option expires ITM, it will automatically be exercised by your broker.

For each contract you hold, your broker will automatically purchase 100 shares of the company at the option’s strike price.

Owning shares of stock isn’t part of our trading strategy.

Stocks tie up large sums of money and are slow-moving, which is the exact opposite of what we want.

Short-term options allow us to capture explosive stock movements without the hassle of owning shares.

So, I will always recommend selling positions with any value left on them a week before they expire.

Now let’s look at the other possibility at the time of expiration.

If an option expires “out-of-the-money” (OTM), that means the stock is trading lower than our strike price.

In this case, the option will expire and will be removed automatically from your trading account, so there’s no further action required on your part.

If our out-of-the-money has a good amount of premium to salvage a week before its expiration, I will most likely exit or roll it forward for more time.

But most of the time, we are making very small limited risk bets that have a huge upside.

That being said…

We still have a few January options still left on the table. As of right now, none of our expiring January options have any value to salvage.

We still have a few days, but it's most likely they will expire worthlessly.

But I'll keep you updated.

That’s it for me today, be on the lookout for our next profit alert!

If you want your questions answered next week, make sure you email it in today.


Joshua M. Belanger

Joshua M. Belanger
Joshua Belanger is founder of CounterVest and the editor of Hot Money Trader. He has been providing ordinary investors blockbuster returns since 2008. In 2018, the average return of Hot Money Trader beat the markets by over 15%