Perfect World Co., Ltd. (PWRD) is expectedto report earnings after the market closes on Tuesday, May 29, 2012, with the corresponding conference call and live webcast at 9:00pm Eastern.
PWRD is expected to earn $0.73 for its 1st quarter. Top Equity News expects the leading Chinese online game developer and operator based to report earnings that will beat Wall Street’s expectations. TEN’s estimate is 79 cents – a 6 cent upside surprise.
Perfect World has been wild following earnings announcements for the last two years. The stock price has moved 42.1%, –29.2%, 19.2%, 8.4%, 13.4%, –20.3%, –0.4%, –23.2%, from the most recent backwards.
There is money to be made here provided you are on the right side of the trade. In the last eight quarterly checkups, only twice has it moved against the direction of the earnings surprise. If TEN’s estimate is right, there is a 75% chance PWRD moves higher.
Based on Perfect World’s chart, the stock price has solid support between $11 and $10.50 a share. At the moment, PWRD is trading for $11.26. Based on the standard deviation of the last two years of earnings announcements, the stock could move 24% in either direction, or $2.70.
Since Top Equity thinks the news favors upside, may we suggest the following strategy, by the stock and buy some insurance with put options. Every 100 shares is an investment of $1,126 using the current, typing price. With the last trade at $1.35 for the June 12 puts, it will cost an addition $135 per contract.
If Perfect World Co., Ltd. (PWRD) hits our target on Tuesday night and has a typical wild ride afterwards, then the trade will profit if the stock moves up more than $1.35. If they miss, then the in-the-money put option protects against downside.
Trading Earnings: Perfect World Co., Ltd. (PWRD) the Perfect Trade? is an article from: 
