Sticking With What Works

I'm going to stick with what has worked this week: Trading low-beta stocks into earnings. This time it's Verizon (VZ) and Phillip Morris (PM). Both stocks look range-bound, although there are risks associated with the trades I've entered.

Verizon (VZ) Source: StockCharts.com View Chart » View in New Window »

For VZ, expectations seem to be on the high side if you listen to the media, but it doesn't seem that way if you look at the stock. The downside looks to be contained around $45 with an upside of $48 possible. There is enough of a turn in the MACD and CCI to make me lean just slightly to the upside. I am long 1x each the October 25 $47 and $48 calls while selling 2x October 18 $48 calls. In addition, I have added a ratio put spread trade long 1x October 18 $46 put and short 2x October $45.50 puts. The total cost on the trade was $0.67. The risk here is a move below $45 after earnings. I am not opposed to owning VZ below $45 as the yield would approach 4.75%....138 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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