Thursday, February 10, 2011

Bunge - Earnings update

Bunge announced earnings today. As you will recall, there was a wide range of estimates on the street. Earnings beat not only the average estimate but the highest estimate. Revenue was near the top end of the analysts range. The company declined to give 2011 guidance. This always seems to make wall street uncomfortable. I suspect this is part of the reason the stock did not react that positively today. ( the cynic in me says this is just because now they just can't parrot back company guidance to their clients.... but I digress). When taking longer term positions for investments, I prefer the stability of a more steady prediction of earnings from a company but from the mid term trading perspective of this holding this uncertainty can actually be beneficial. Hopefully it will keep volatility high and increase the chance for short-term profits and covered call strategies.

Given the earnings seemed to contain no major negative surprises, it is time to add the second lot of the trade. Prior to adding a lot, I cleaned up the prior options "insurance" by selling off the protective put for a whopping $.10 net of commission. That means the "insurance" for buying before earnings cost a net $.90. In hind sight, not a good policy to write, but better safe than sorry. To try to establish the second trading lot, I sold one lots worth of Feb $70 puts for $1.85. Either one of two things will happen next week
a). the stock will stay under $70 and the portfolio will be long a second lot of stock at a net price of $68.15 . That is over a 1% discount from just buying the stock today, and obviously I am comfortable owing these shares
b). the stock will bounce over $70 and the put can be covered for a 2% one week gain and we will need to look for another way to get a second lot of the stock.

No comments:

Post a Comment