Those of you who loves branded designer’s products such as Polo Ralph Lauren Corp. (NYSE: RL, stock) and Estee Lauder Companies Inc. (NYSE: EL, stock) would surely remember the pocket money which you had made if you’re trading option or investing stocks. If you can’t remember, it was just slightly more than two months ago before both Polo Ralph Lauren and Estee Lauder beaten its’ earning estimate.
Looking at the chart, Ralph Lauren didn’t gap-up after earning announcement on Feb-1-2007 before-market-open as what I hoped for even though it beats earning. It registered earning of $1.03 versus estimated $0.92 cents per share. It could be due to the fact that once a stock (from the same sector) beaten and gapped-up (Estee Lauder announced earning earlier than Ralph Lauren and gapped up real nice), the rest of the stocks from the same sector could have experienced the effect of stock-uptrend. Thereafter the gap-up could be limited unless the earnings announcements are exceptionally fantastic.
Anyway, I’m not complaining based on the 100% profit I’m making from the two and a half months trading the option of this stock. Noticed that I deviate from the rule of buying option with minimum of more than 120 days to expiration? Well, sometimes the market sentiment of a particular stock would made you real confident of the fundamental of the stock. Hence I bought with less than the best-of-practice time-value. And needless to say, the time-decay kicked-in soon after (as you can see from the chart).
It took more than two months from the date of my entered position for the stock to breach higher over it’s resistance level of $89. Based on Apr-16-2007 stock’s performance and the way the Dow Jones behaved, I concluded that this is my last chance to take profit before time-decay eats further into my profit. Please note that the April-2007 expiration is days away.
So, what do I think of this stock on it’s next earning which is scheduled (un-confirmed) to be released on May-23-2007 (before market open)? There’s only one way to find out – you got to come back to FinanceTwitter for more information.
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