Trade Alert: Earnings, 7/24/2023
Two bullish and two bearish trades.
Weird how multinational corporations pretend to be NGOs these days. This is from one of the companies we’re betting against today.
Recall that we’re looking at four metrics when placing these earnings trades:
LikeFolio’s earnings score based on social data. The higher the number, the more bullish, the lower (more negative) the number, the more bearish.
Portfolio Armor’s gauge of options market sentiment.
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.
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 four trades on companies releasing earnings after the close today or before the open Tuesday, two bullish:
Social data +40, PA options market sentiment bullish, Setup rating of 6, Zacks ESP of 0% (neutral).
Social data +23, PA options market sentiment neutral, Setup rating of 8, Zacks ESP +0.86%.
And two bearish:
Social data -27, PA options market sentiment neutral, Setup rating of 3, Zacks ESP -0.66%.
Social data -42, PA options market sentiment neutral, Setup rating of 4, Zacks ESP of -0.12%.
Details below.
The Bullish Trades
Alaska Airlines (ALK 0.00%↑). A vertical spread expiring on August 18th buying the $52.50 strike calls and selling the $55 strike calls for a net debit of $1.25. The max gain on 3 contracts is $375, the max loss is $375, and the break even is with ALK at $53.75.
Logitech International (LOGI 0.00%↑). A vertical spread expiring on August 18th buying the $62.50 strike calls and selling the $65 strike calls for a net debit of $1.25. The max gain on 3 contracts is $375, the max loss is $375, and the break even is with LOGI at $63.75.
This trade hasn’t filled yet. This trade filled at $1.25 on 7/24.
The Bearish Trades
Whirlpool (WHR 0.00%↑). A vertical spread expiring on July 28th buying the $150 strike puts and selling the $149 strike puts for a net debit of
$0.35. The max gain on 10 contracts is $650, the max loss is $350, and the break even is with WHR trading at $149.65.This trade hasn’t filled yet. Raised my limit price to $0.40, so the max gain on 10 contracts is $600, the max loss is $400, and the break even is with WHR trading at $149.60.This trade hasn’t filled yet. This trade never filled.Kimberly-Clark (KMB 0.00%↑). A vertical spread expiring on July 28th buying the $138 strike puts and selling the $137 strike puts for a net debit of $0.50. The max gain on 7 contracts is $350, the max loss is $350, and the break even is with KMB trading at $137.50.
Exiting These Trades
I’m setting a limit orders to exit these trades at 90% of the spread initially. So, for example, on the KMB trade the spread is $1 ($138 - $137), 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.
The LOGI trade filled for me, waiting to see on the others.
For the Kimberly-Clarke trade with a net debit of $0.40, I show a max gain of $420, a max loss of $280 and a breakeven at $137.60 - to have it be max gain $350, max loss $350 and breakeven at $137.50, I think it would need to be a net debit of $0.50.
ALK beat on top and bottom lines but is down 11% anyway today due to weaker than expected revenue guidance. These calls don't expire until August 18th, so I'll hold this spread for now and see if the stock recovers over the next week or two.