Thursday, September 27, 2007

A Trade on Resources Connection Inc (RECN)

Dear fellow options traders :

Resources Connection Inc (RECN) is a company which provides outsourced professional services to corporate clients in the United States.

I checked that it would be reporting earnings on 25 Sep 2007 after market close.

There were not much news at Briefing.com for my fundamentals research on RECN but at the Yahoo Finance web-site I saw a report dated 4 Sep 2007 Market Spotlight: Staffing Companies where research analysts were forecasting tougher times for staffing companies. They felt that the slowing economy might significantly depress job creation in coming months due to tighter credit and problems in the housing sector.

Some of the staffing companies that have seen their share prices tumble recently include Robert Half International Inc., which had declined around 13 percent in the past three months. Shares of Kelly Services Inc. had lost around 19 percent, while Korn Ferry International, which reported fiscal first-quarter results recently, had also shed nearly 22 percent.

In another report from The Motley Fool, even a Motley Fool CAPS All-Stars Player frown upon this 5-Star Stocks Leader.

Based on the weakening of the staffing companies sector, I paper traded 2 contracts of Oct 30 Put @ $185.00 each on 25 Sep 2007 when RECN was trading around $29.30.

On 25 Sep 2007 after market closed, RECN reported Q1 (Aug) earnings of $0.23 per share, including stock based compensation expense and tax benefits, which might not be comparable to the Reuters Estimates consensus of $0.28; revenues rose 17.6% year/year to $194.1 mln vs the $197.4 mln consensus.

On 26 Sep 2007 before market opened, there were 5 downgrades of this stock from analyst and RECN gapped down -$5.50 to $23.83 when trading began. I observed the price, volume, and Level 2 data carefully before I close the position for $760.00 per contract, netting a profit of $1,120 after deducting commissions.




Related Trade in my Stock Options Trading Blog

A Resource Connection Q3 2007 Earnings

If you've managed to find out about the Live Freely! Seminar from my stock options trading blog and subsequently sign up for it, I hope you could do me a kind favour and mention Mr Tony Chai from Batch 14 as the referrer. Thank you for your kindness.

Wishing you Profitable in your Options Trading too.

Yours Sincerely,

Tony Chai
Options Trading Resources

2 comments:

Futures Options Brokers said...

hi,

do you have a good trading system in biotech stocks ?

thanks

Tony Chai said...

Hi :

I believe you have experienced pharmaceutical cos. gapped up or down tremendously after FDA announced the Phase III results of the companies' new drug application.

One way would be to trade an option days or a few weeks before the FDA made the announcement and sell the option on the eve of announcement.

There would usually be huge built-up of implied volatility (IV) leading to the day of announcement & you can take advantage of the increase in premium to make a profit.

But such a trade still carries some risks because the option would usually be expensive 1 or even 2 months before the FDA announcement. So you must balance the risks/rewards ratio carefully.

You can keep track of new drugs application at this web-site.

Yours Truly,

Tony Chai
My Options Trading Blog