Copy My Trades

My strategy of mixing fundamental research with technical gap analysis is too complex for a newsletter service. Hence, for those wanting to see my actual trades, I've began offering this service.

Get:

  • A daily email prior to market open with what I plan to trade today. I include an explanation of the theory behind the trade and the exit strategy.

 

My Strategies

  • Earnings predictions
  • Gap trades
  • Technical trades
  • Algorithm signals (from my exclusive algorithms)
  • Examples follow

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Damon Verial
4407 68th st ct nw
Gig Harbor, WA 98335
USA

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*Updated* Trade Examples

The following trades are real trade examples send out to Copy My Trades subscribers. Transactions from my account are displayed below as proof. All numbers include commissions. I have chosen the trades easiest to explain for the sake of showing you my trading strategy. In the emails you receive, I will also be explaining each trade. Past performance does not guarantee future performance.

AVGO: Earnings Trade

Mergers had set AVGO back, but my estimates showed the company to soon hit all-time highs in profits and revenue – as soon as early-2017. This quarter's earnings report was to confirm or deny whether the company was really on track to new highs. This is why the current quarter's earnings were important for the company and especially playable for us earnings traders.

 

Because we were looking for a "the-past-continues" type of report, we could rather safely bank on the historical patterns. This is a situation in which continued consistency should have led to a rally, and only a significant snag or negative earnings surprise could have caused the stock to sell off. As analysts had consistently underestimated AVGO's earnings in the past, we safely bet that AVGO would beat again this quarter.

 

But when I had last looked at AVGO, I figured the beat was priced in. Right before earnings, it dropped from $175 to $165, giving us a much better entry point. I playing AVGO long and earned over double my investment.

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TIF (full example from Copy My Trades)

SIG, another jewelry company recently reported a beat, suggesting a bullishness in this sector. TIF is a rarity in the jewelry market in that it is the only well-known US brand. The advantage of it being a US company that primarily makes its profit in the US is not having to deal with Forex issues; a strong dollar does not hurt TIF so much.

 

Fundamentally, we should not predict any surprises in margins or growth. EPS growth has been negative for the past six quarters. That might change this quarter, and if it does, it will be taken as a sign of growth turnaround. We are not banking on that, but it’s a good catalyst.

 

TIF is going to be presenting forward guidance on its FQ4 during this quarter’s earnings. FQ4 is TIF’s best quarter and the main profit-driver of the company. Guidance should be strong.

 

Why?

 

For one, retail sales and spending are picking back up in the US, specifically in the luxury market. But of more interest to TIF investors recently is its flagship store, which brings in 30% of TIF’s sales and 10% of its profits. This store is located right next to the Trump Tower and has been the focus of concerned, nervous TIF investors.

 

Are the nearby protests reducing sales?

Is the red tape preventing customers from entering the store?

 

If you search the news quickly, the answers seem to be “yes.” But how much of that news is real and how much of it is part of a lingering “blame Trump” mentality in the liberal media? Others have reported unobstructed entrances to the store and strong foot traffic.

 

This is the typical overreaction you get when an easily understood news item can be interpreted by investors. Overall, if you limit the supply of a luxury item or raise the barriers to obtaining it, you make it more enticing, fueling demand. It’s an abstract concept, certainly moreso than:

 

“Trump president; neighboring doors hard to open; Trump bad; Chinese tourist scared, no buy jewelry; TIF stock down; my aunt said Apple computers are easy to use so we should buy Apple stock…”

 

…low-level thinking for low-level traders and investors. Ignore the news, at least on the surface, please.

 

This is TIF’s strong season. And it covers earnings. The probability that TIF rises on a beat is nearly 100%; the probability that TIF rises on a miss is nearly 50%.

 

The statistics are on our side regardless of last quarter, which I believe will be good anyhow. The focus is guidance. Management will likely point to everything I just pointed to above: strengthening sales, a possible turnaround in EPS on the way, and a positive spin on the Trump presidency/neighborhood.

 

If TIF is treated as a luxury stock, it is fairly valued. If it is treated as a retail stock it is undervalued. Either way, this does not put the risk profile against us; rather, it works in our favor, especially with options.

 

Today will be our last day to open this trade, and as evidenced by Wedneday, many are already buying last-minute. We will too. Here is our play:

 

Buy TIF Dec16 $75 call

 

This is an at-the-money call that maximizes our gamma – i.e., we gain the best nonlinear risk/reward profile possible with a long call at this strike. Because TIF is a “reverter” after earnings, it dips a bit after a rally and rises a bit after a fall. We can regain ground if we are wrong, but we should sell immediately if we are right.

 

Why a pure long call? Simply because options are fairly valued on TIF right now. No need to overcomplicate things, especially seeing as I get follow-up emails every time I send out a complex options strategy; we only have a few hours to open this trade, so we shouldn’t be racking our brains with the reasoning for the strategy.

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STZ (full example from Copy My Trades)

I’m looking at STZ, which I played last quarter, correctly. STZ has a high probability of rising on earnings, 91% according to my calculations.

 

STZ reports earnings on Oct 5, making us a bit early. Generally, this is good because if we are right, the stock tends to trend in the earnings movement direction. Also, we avoid higher option prices and the possibility of buying when the stock is overbought or when the beat is priced in.

 

With STZ trading at roughly the same price for the past two months, we can safely say that STZ is both not overbought nor accounting for an earnings beat. STZ is not exactly a popular stock, anyway, so the details of the company’s ability to consistently beat earnings and raise guidance is lost on the average retail investor (you know, the guy who contributes to the overboughtness of a stock). So, I am going to take a position on STZ now.

 

I’m already convinced on a long position on STZ, but maybe you are not. So here are some of the details that have convinced me to go long on STZ:

 

Seasonally, Oct-Dec are the best months for STZ. Historically – using data from the past 20 years – we see that the average gains over this season are 10%.

 

The stock is fairly valued. High price does not equate to overvaluation. Relative to the industry, STZ is trading at average PE.

 

No significant drift in STZ over the past 3 months means that the market has not priced in a beat. This is especially odd because STZ has a 90% probability of beating and rallying afterward. Possible market inefficiency here?

 

No significant call or put buying. In other words, no insider action or big speculators. STZ is underfollowed, and underfollowed stocks tend to outperform.

 

A very strange but interesting pattern follows: In a review of its earnings reports, I found that STZ posts misses on Thursdays and beats on Wednesday. This could be mere coincidence, or it could be that STZ delays the earnings by a day when earnings are poor. Why? Perhaps as a signal of some sort… who knows? Anyway, STZ is reporting Wednesday this month, which is good news for longs.

 

Overall, I am confident enough in a STZ beat to place my money on earnings. Actually, I played STZ last quarter into earnings. I ran a short combo with a hedge. Opened at a net credit of $100, closed at a net profit of $500. Total profit = $600. (If you want details on this trade and how I closed each leg, respond to this email and I’ll show you what I did, exactly).

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AZO: Pre-event Drift Trade

Here, we first played pre-earnings drift. After we locked-in our profit on that trade, we reopened the trade for earnings. Here is the first of two emails I sent out to subscribers of Copy My Trades:

 

I’m looking at an earnings play a couple weeks away. The play is Autozone (AZO), which trades in the hundreds. Recently, the stock has sold off on the news that Amazon intends to enter the auto parts market.

 

The selloff is bringing AZO to relative lows right before earnings. AZO was already trading at half the PE of the retail market, making it a bargain for a market that is so overbought. Stocks with low PE-industryPE ratios tend to rally hard upon strong earnings reports/guidance.

 

AZO’s September seasonality is also strong. I think we are going to hit a bottom pretty soon here, with news dragging AZO down to a ralliable number. The main issue is whether to hold over earnings.

 

Why is holding over earnings an issue? Because AZO shows no clear earnings pattern; the numbers show it acts randomly on the release of earnings. Still, we want to play the long side because of the PE/industry ratio – a rally will be stronger than a selloff at this valuation.

 

The statistical volatility of AZO is approaching the historical volatility. This is a rare phenomenon before earnings and implies that options are becoming more fairly valued. Still, because AZO is so expensive, buying calls outright will be beyond many of us. So, you can change up the strike price or date of the calls I’m recommending to suit your account:

 

Buy to open Dec 760 calls

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NFLX: Algorithm Signal Trade

One of my algorithms showed that the $3 gain NFLX showed on the uneventful day of Sept 12 was unsustainable, that such a rally will almost always be followed by a down day. You can see Sept 6-7 and Sep 17-19 for more evidence of this. Anyway, my algorithm showed that NFLX would likely sell off on the Sept 13, so I sent out an email to Copy My Trade subscribers telling them to buy puts on NFLX.

 

The next day, NFLX gave back that $3, allowing for a quick but safe 10% gain after commissions. Larger players would have done much better than my measly $700 investment.

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AGN: Technical Trade

I sent out a notice that AGN was oversold and that, because of its trend and volatility, it was likely to head up $10 or so over the next week. After AGN touched $240, I sold my calls for 34% profit. You might notice that had we stayed in longer we would have made more; however, our exit indicator had already flashed, so we took the conservative action and walked away with our profits.

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CPG

CPG had recently cut its dividend. As an energy stock, it was likely to fall faster than other stocks due to the dividend cut. In addition, the window gap on the previous day told me that CPG would likely drop quickly on Sep 23.

On market open, I bought 4 high-quality puts, as determined by certain models, ratios, and Greeks. CPG acted as I predicted, falling to a huge extent. After another down gap, I exited the position, taking 30% profit before commissions, 28% profit after commissions.

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DISH

In late September, DISH struck a new deal with the FCC. At that time, the stock was undervalued, according to my model. I decided to enter on Sep 30, after two down gaps culminated in a doji star. I bought a call option at market open on Sep 30.

I sold at the market close on Oct 9. Oct 9 was an area gap day, implying that DISH would fall. It did fall immediately afterward, so I made the right choice to get out when I did.

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BABA

The Chinese market had a quick crash, making many Chinese stocks trading on the US exchanges undervalued. I targeted BABA as one of the most undervalued. I bought at market open on Oct 2, which is when I predicted a reversal.

I sold on Oct 14, the first sign of a weakening momentum. Though in retrospect, holding on longer would have been a good decision, hindsight is 20-20. I still made over double my investment, even after commissions.

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DRN

In late October, the Fed started discussing increasing interest rates. Being so, many markets would move quickly. I chose to play the real estate market, as real estate stocks fall when interest rates increase.

I chose DRN, which is an ETF on the real estate market. I bought a put option as the market opened on the Oct 23. I got out on market close on Nov 12, which was statistically the best choice to exit after the area gap on Nov 6 – a gap that eventually filled and could have eaten all my profit.

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VXX

 

My statistical backtests and analyses on VXX show that its up gaps always fill. Thus, I am always looking for up gaps on this ETF. On Nov 12, an up gap occurred. I bought a put option on market open the next day.

I closed my position quickly, right before the up gap filled. I could have held on longer, until the gap filled on Nov 23, but investor sentiment at that time was fearful, and a second up gap was likely. Thus, I decided to take my profit and close my position.

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Other Examples - Earnings Trades

In Copy My Trades, I often send out trades on earnings predictions. These trades are high-ROI trade with low risk. Such a trade sounds impossible, but with the right analytical method and the right options strategies, you can make several 100%+ ROI trades every month.

 

Some examples follow.

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WMT

Walmart released its earnings report, driving the stock upward. By my calculations, the stock was overvalued. Also, the gap on Nov 17 was likely an area gap. Thus, I decided to buy a put option on WMT on market open, Nov 19.

As I had predicted, the stock fell to where I had valued it, $59. Though the gap had not closed, I was ready to take profit. I exited on Dec 1.

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DAL

On Dec 1, I saw signs of DAL’s previous down gap closing. Thus, I bought a call option. The next day, the stock jumped past my target price. I exited my position, as I had reached my target.

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AAPL

My fundamental analysis of AAPL shows that it tends to trend downward in December. The area gap on Nov 18 was my target. On Nov 25, I bought puts on AAPL.

The area gap closed on Dec 3, so I exited my position. It was a good decision, as on the next day, AAPL bounced back upward.

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