Trade Alert: Earnings, 8/1/2023

All bearish trades today.

The WWE is one of the companies we’re betting against today.

Recall that we’ve been 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.

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 5.99%↑, 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 seven trades on companies releasing earnings after the close today or before the open Wednesday, all bearish:

1. Social -22, PA Options Sentiment Neutral, Setup 7, ESP 0% (neutral).

2. Social -22, PA Options Sentiment Neutral, Setup 3, ESP -15.49%.

3. Social -25, PA Options Sentiment Neutral, Setup 6, ESP -0.53%.

4. Social -25, PA Options Sentiment Neutral, Setup 8, ESP +2.69%.

5. Social -31, PA Options Sentiment Neutral, Setup 8, ESP 0%.

6. Social -34, PA Options Sentiment Neutral, Setup 8, ESP 0%.

7. Social -40, PA Options Sentiment Bearish, Setup 8, ESP -9.09%

Details below.

The Bearish Trades

1. Match Group (MTCH 0.00%↑). A vertical spread expiring on August 4th buying the $46.50 strike puts and selling the $44.50 strike puts for a net debit of $0.90. The max gain on 4 contracts is $440, the max loss is $360, and the break even is with MTCH at $45.60. This trade hasn’t filled yet. This filled at $0.90 on 8/1.

2. Pinterest (PINS 0.00%↑). A vertical spread expiring on August 4th buying the $29 strike puts and selling the $27 strike puts for a net debit of $0.89. The max gain on 7 contracts is $440, the max loss is $356, and the break even is with PINS at 28.11.

3. Starbucks (SBUX 0.00%↑). A vertical spread expiring on August 4th buying the $101 strike puts and selling the $99 strike puts for a net debit of $0.96. The max gain on 3 contracts is $312, the max loss is $288, and the break even is with SBUX at $100.04.

4. Allegiant Travel (ALGT 0.00%↑). A vertical spread expiring on August 18th buying the $120 strike puts and selling the $115 strike puts for a net debit of $2.08. The max gain on 1 contract is $292, the max loss is $208, and the break even is with ALGT at $117.92.

5. Haverty Furniture Companies (HVT 0.00%↑). A vertical spread expiring on August 18th buying the $35 strike puts and selling the $30 strike puts for a net debit of $1.48. The max gain on 2 contracts is $704, the max loss is $296, and the break even is with HVT at $33.52.

6. World Wrestling Entertainment (WWE 0.00%↑). A vertical spread expiring on August 18th buying the $105 strike puts and selling the $100 strike puts for a net debit of $1.98. The max gain on 2 contracts is $604, the max loss is $396, and the break even is with WWE at $103.02.

7. Denny’s (DENN 0.00%↑). A vertical spread expiring on August 18th buying the $12.50 puts and selling the $10 puts for a net debit of $0.95. The max gain on 4 contracts is $620, the max loss is $380, and the break even is with DENN at $11.55. This trade hasn’t filled yet. This trade never filled.

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 WWE trade, the spread is $5 ($105 - $100), so I will set my limit order to exit at $4.50. If that exit order doesn’t fill after earnings, I’ll lower the price as needed before expiration.