MMM reported earnings today.
Not to say I told you so...but they guided down for q4.
However, CCI was surprised that they also missed q3 numbers. The stock pulled back to $77.
From a trading perspective, the weekly $80 calls plunged on this news. Hence the $80 weekly calls sold a few days ago plunged towards zero making that a profitable hedge.
As mentioned above, CCI was not surprised to see MMM lower expectations (they seem to do that a lot) but the q3 miss was surprising and concerning to me. I looked at just closing the position, but decided that the volatility was probably not out of this stock yet, and even lower expectations of $6 EPS this year should provide some floor for the stock.
So we rolled the profitable weekly option position out and down. Specifically we covered the Oct $28 call and sold the Nov $75 call for $3.30. Scenarios if held to expiration are
- Stock falls below $75 and CCI remains long one lot of shares. Those shares were purchased at $80 but we will have collected nearly $7.00 in option premium so the effective break even is down to $73.
- Stock stays over $75. The stock will be called away at $75, but having collected $7.00 in premiums the portfolio would have made $2/share on the trade.
However, as the market digests these results, there is potential additional volatility in the stock so CCI may trade out of this position before expiration.