AMZN and BRCM Trade Update

by Dan April 27, 2011 9:22 am • Commentary

1. AMZN‘s disappointing eps results and operating margin guidance should have the stock down, especially when  you consider the stock is within a few percent of its all time highs…..

-the jury will be out for a while whether or not all of this spending on full-fillment centers and other projects pays off, not sure why investors aren’t taking more of a wait and see attitude here…..

-I am long the May 170/160 Put Spread and going to let it breath a bit, stock went almost as low as 170 in the after hours at one point last night…..will look to see if we have similar action to NFLX yesterday where the stock opened down, then had a little rally and then fell apart closing on the lows….

-As far as the structure I picked levels where I thought it could go if my thesis was right and risked only what I was willing to lose if I was wrong, or in this case the market doesn’t come to the same conclusion about the results…..

2. BRCM, company disappointed clearly and is trading back down towards the lows from the pre INTC/AAPL earnings blitz.  Stock will remain in the dog house as one of the few tech stocks to disa0point in the last few weeks…..

– I am long May 42/44 call spread, this will get killed on open, will look to get what I can for it, as the stock not likely to be above 42.50 btwn now and May expiration.  As far as my rationale for this trade I was trying to be a bit positive on something and thread the needle a bit…..don’t worry I will just stay bearish.

UPDATE Apr 27, 2011 at 10am:

BRCM chart today is exhibit A why I no longer trade stocks outright into earnings and generally use vertical spreads…..If anyone tells you they think they have an edge regarding what the company will actually announce you shouldn’t be listening to them…..I like to play earnings because of the volatility, and trust me, I get them wrong plenty, but I hope you guys are recognizing a little theme here, Arrive at your view and then figure out the best way in which to express it while preserving your capital, define your risk.

[caption id="attachment_1451" align="aligncenter" width="439" caption="BRCM 4 Month Chart                                         Image provided by Livevol® Pro."][/caption]