Trade Alert, 7/27/2023

Two bullish trades and one bearish one.

One of the companies that’s a subject of today’s trades.

Recall that we’re looking at four metrics when placing these earnings trades:

1. LikeFolio’s earnings score based on social data. The higher the number, the more bullish, the lower (more negative) the number, the more bearish.

2. Portfolio Armor’s gauge of options market sentiment.

3. Chartmill’s Setup rating. On a scale of 1-10, this is a measure of technical consolidation. For bullish trades, I want a high setup rating; for bearish trades, a lower one.

4. Zacks Earnings ESP (Expected Surprise Prediction). This is a ratio of the most accurate analyst’s earnings estimate versus the consensus estimate.

I’m looking for 1 or 2 of the other signals to agree with the social data, but I’m also using my judgment based on past performance of these signals. We’ve got three trades on companies releasing earnings after the close today or before the open Thursday, two bullish:

1. Social data +61, PA options market sentiment neutral, Setup rating of 9, Zacks ESP of 1.14%.

2. Social data +39, PA options market sentiment neutral, Setup rating of 7, Zacks ESP of 0.38%.

And one bearish:

1. Social data -29, PA options market sentiment neutral, Setup rating of 3, Zacks ESP 8.07%.

Details below.

The Bullish Trades

1. Church & Dwight (CHD 0.00%↑). A vertical spread expiring on August 18th buying the $95 strike calls and selling the $105 strike calls for a net debit of $3.90. The max gain on 1 contract is $610, the max loss is $390, and the break even is with CHD at $98.90.

2. Colgate-Palmolive (CL 0.00%↑). A vertical spread expiring on August 18th buying the $77.50 strike calls and selling the $80 strike calls for a net debit of $1.12. The max gain on 3 contracts is $414, the max loss is $336, and the break even is with CL at $78.62.

The Bearish Trade

1. Ford (F 0.00%↑). A vertical spread expiring on July 28th buying the $14 strike puts and selling the $13 strike puts for a net debit of $0.41. The max gain on 8 contracts is $472, the max loss is $328, and the break even is with F trading at $13.59.

Exiting These Trades

I’m setting a limit orders to exit these trades at 90% of the spread initially. So, for example, on the F trade the spread is $1 ($14 - $13), so, I’ll try to exit at a net credit of $0.90. If I don’t get that after the earnings release, I’ll lower my limit price and take what I can get before expiration.