Trade Alert: Earnings, 7/31/2023
Four Bullish Trades and One Bearish
Amanda Milius enjoying a Hestia Tobacco cigarette. Hestia is one of the new competitors to the cigarette company we’re betting against today.
Recall that we’ve been 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.
Last week, I said I was looking for 1 or 2 of the other signals to agree with the social data, but I was also using my judgment based on past performance of these signals. Performance of the social data signal was stronger than the other signals last week, and where it was wrong (SNAP 0.00%↑, for example), other signals such as Zacks ESP were wrong too. So my judgment this week is to lean heavily on the social data and place more trades based on it. That said, I’ll post the other signals here if you’d like to use them to decide which trades to take.
We’ve got five trades on companies releasing earnings after the close today or before the open Tuesday, five bullish:
Social +46, PA Options Sentiment Bearish, Setup 3, Zacks ESP 0% (neutral).
Social +44, PA Options Sentiment Bullish, Setup 3, Zacks ESP 0%.
Social +40, PA Options Sentiment Neutral, Setup 3, Zacks ESP 6.15%.
Social +24, PA Options Sentiment Bearish, Setup 8, Zacks ESP 23.08%.
And one bearish:
Social -42, PA Options Sentiment Bearish, Setup 8, Zacks ESP 0%.
Details below
The Bullish Trades
Sirius XM Holdings (SIRI 0.00%↑). A vertical spread expiring on August 4th buying the $5 strike calls and selling the $6 strike calls for a net debit of $0.23. The max gain on 14 contracts is $1,078, the max loss is $322, and the break even is with SIRI at $5.23.
JetBlue Airways (JBLU 0.00%↑). A vertical spread expiring on August 4th buying the $7.50 calls and selling the $8.50 calls for a net debit of $0.40. The max gain on 8 contracts is $480, the max loss is $320, and the break even is with JBLU trading at $7.90.
Molson Coors (TAP 0.00%↑). A vertical spread expiring on August 18th buying the $70 strike calls and selling the $72.50 calls for a net debit of $1.05. The max gain on 3 contracts is $435, the max loss is $315, and the break even is with TAP at $71.05.
TrueCar (TRUE 0.00%↑). A vertical spread expiring on August 18th buying the $2 strike calls and selling the $3 strike calls for a net debit of $0.45. The max gain on 10 contracts is $385, the max loss is $315, and the break even is with TRUE at $2.45.
The Bearish Trade
Altria Group (MO 0.00%↑). A vertical spread expiring on August 4th buying the $45.50 puts and selling the $44.50 puts for a net debit of $0.31. The max gain on 10 contracts is $690, the max loss was $310, and the break even is with MO at $45.19.
Exiting These Trades
For each trade I’m entering a GTC order to exit at a net credit of 90% of the spread. For example, with the MO trade, the spread is $1 ($45.50 - $44.50), so I will set my limit order to exit at $0.90. If that order doesn’t fill after earnings, I’ll lower the price as needed before expiration.
Exited MO at a net credit of $0.69 for a profit of 123%.
In previous weeks, I've commented on some earnings releases as they've come in, but we've got so many this week, I probably won't. I will of course let you know in the comments on each post if and when I exit a trade, and I'll have some general comments about how the week's trades went and what I might do differently going forward in my Exits post at the end of the week.