Trade Alert: Earnings, 7/19/2023

Another bearish bet.

Noomi Rapace as an evil elf in Netflix’s Bright.

Adding Another Bearish Bet

Recall that we’re looking at four metrics when placing these 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. Our additional bearish trade for today has a LikeFolio earnings score of -37, a bullish options market sentiment rating from Portfolio Armor, a setup rating of 3 from Chartmill, and a +2.11% Earnings ESP from Zacks (slightly bullish). Obviously, in this case, I’m putting more weight on the social data and setup rating, as I think the stock has gotten over-extended.

Details below.

The Trade

• The stock is Netflix (NFLX 0.00%↑), and the trade is a vertical spread expiring on July 21st buying the $475 puts and selling the $470 puts for a net debit of $2.45. The max gain on 2 contracts is $510, the max loss is $490, and the break even is with NFLX at $472.55. This trade hasn’t filled yet. This trade filled at $2.45 on 7/19.

Exiting This Trade

I’m setting a limit order to exit this trade at 90% of the spread initially. So, since the spread is $5 ($475 - $470), I’ll try to exit at a net credit of $4.50. If I don’t get that after the earnings release, I’ll lower my limit price and take what I can get before expiration.