It Feels Like Christmas Morning

Waiting to unwrap another >100% earnings trade gain.

Christmas In May

You may recall we had a few winning earnings trades last week: 

• A bullish bet on Taylor Morrison Home Corporation (TMHC) for a gain of 126%

• A bearish bet on First Republic Bank (FRC) for a gain of 80%. 

• Another bearish bet on FRC for a gain of 92%

• And a bearish bet on Snap, Inc. (SNAP) for a gain of 123%. 

Yesterday, we posted another two earnings trades.

One was for a company releasing earnings after the close Monday: 

A Bullish Earnings Trade

This is another one based on social data, but it’s also supported by technicals (8 out of 10 overall rating) and fundamentals (Piotroski F-Score of 8). The company is Sprout’s Farmer’s Market, Inc. ( SFM 6.72%↑ ), and this is the trade I placed:

A call spread expiring on May 19th selling the $36 strike calls and buying the $35 strike calls for a net debit of $0.45. The break-even here would be with SFM at $35.45, and the max gain on 10 contracts would be a gain of $385 versus a max loss of $315.

The max gain on that trade happens when the stock is above $36. SFM closed at $35.02 on Monday, but climbed to $37.90 after hours on its Q1 earnings beat. As long as it holds above $36 today, we should be able to exit that trade for a gain of about 115% (leaving a few percent on the table for the market makers). So this feels like Christmas morning. Barring any unforeseen development, there's going to be a >100% gain under the tree when we get up. 

There's still time to place the other earnings trade in that post--that company releases earnings on Thursday. Maybe we'll have another present under the tree on Friday morning?