A Few Trades To Share

Dear fellow options traders :

Q3 earnings season has started and these were some of the paper trades that I've made.

Apple Inc (AAPL) - Have been following Apple Inc's development for a while and foresee them to beat their Q4 earnings as I expected shipment of the new Macs, iPod & iPhone to be strong during the quarter. AAPL would usually guide conservatively for next quarter's earnings. Thus when AAPL provided upside guidance for its Q1 EPS & revenue numbers, the stock gapped up +$14.50(!!), much higher than the average gap price of $6.00, when market opened on 23 Oct 2007 (Tuesday). I bought a Nov 175 Call on the eve of earnings and sold it on 23 Oct 2007 for a $645.00 profit.



Apollo (APOL) - Apollo is an education provider and has performed well in the previous earnings quarter. I expected them to report equally well this quarter thus I paper-trdaed a Nov 70 Call. Although EPS was in-line at $0.60, revenue rose 14.2% year/year to $713.9 mln vs the $701.8 mln consensus. The management also approved an additional $500 mln for share repurchases. On 23 Oct 2007 (Tuesday), APOL gapped up +$3.50 to $69.50 and intra-day went up +$3.00 to close at $72.50. I sold the Nov 70 Call for a profit of $150.00.



However, I encountered a losing trade with :

Illumina Inc (ILMN) - I expected Illumina to peform well for its Q3 earnings due to a major research analyst's upgrade of the Life Sciences sector on 5 Oct 2007. The company also announced a multi-million dollar agreement with the University of Virginia and the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK) on 15 Oct 2007 and on 12 Sep 2007, ILMN signed a fourth genotyping service agreement with Cancer Research UK. I bought a Nov 60 Call on earnings eve. Altough Illumina reported a good Q3 earnings quarter beating EPS by $0.15 & also beat on revenues; the stock was punished when the company guided Q4 revenue in-line. Thus, On 24 Oct 2007 (Wednesday), ILMN gapped down -$4.00 when market opened and I sold the Nov 60 Call for a loss of $339.00.



Yours Truly,

Tony Chai
Options Trading Resources