By Dan Darrow

December 06, 2022

Today's Trade Ideas

Symbol: GME

Style: Event

Strategy: Strangle


Long Dec16 $26 call

Short Dec16 $30 call

Long Dec16 $21 put

Short Dec16 $17 put     

Action Area: $1.15 - $1.50

Comments: GME is a speculative candidate for a volatility strategy on earnings this week. First off, any trade on GME is speculative to begin with because the stock doesn’t necessarily trade on fundamentals or technicals at times. With that said, this quarter is one of the more interesting setups on the stock in a while following its several-month consolidation. GME has been range bound between ~23 and ~28 since the beginning of September, its longest stretch of sideways action since it went parabolic in early 2021. While earnings have not always been huge events for the stock, the tight recent range should lead to a large move higher or lower once it resolves, and the report tomorrow is the biggest catalyst for the foreseeable future. With option pricing modest, a Dec16 strangle is an interesting way to play the stock for earnings, and the strategy will be targeting a move of $3.50-$4 in either direction over the next week. There will be no stop on the trade until after the report, and a lack of movement will take a toll on the short-term contracts, so be sure to plan your size accordingly. 

Symbol: TJX

Style: Swing

Strategy: Call Spread


Long Jan20 $80 call

Short Jan20 $87.50 call

Action Area: $2.25 - $2.70

Comments: TJX is a bullish, momentum-based trade idea. Off-price Retail is the place to be right now, with three of the big players in the space (TJX, ROST, and BURL) all delivering solid results and/or offering upbeat commentary. TJX was the first of the three to report results, and the mid-November print helped the stock break through key 2022 resistance around 75 and extend higher to 80+. A two-week consolidation near 80 has formed a tight bull flag, and rising support from the 8day ema and soon-to-join 20day sma should help deliver another leg higher in the near term. The Jan20 call spread will be targeting an initial move to 81+ to retest the November high (81.16), and the swing trade will have a tight stop below 77.50 (under the 20day sma) or a 30-40% net debit loss, whichever happens first.

On The Radar

Industrials have been under pressure the first two sessions this week, and that has helped MMM begin to establish momentum lower again. After dropping quickly near 121 last week, MMM reversed sharply to trade into the high-120s (post-Powell speech), but it failed to hold above the 20day sma/100day sma congestion area. It sank Friday and has remained heavy this week, with today’s action putting it back on a path to the ~120 level again. The initial Dec30 put spread has already been rolled down, but we can tighten the stop on the remainder of the position to 127 now. 

We are closing in on Dec16 expiration, and MDGL has still not reported data yet. We aren’t in options on that name at the moment, but we are in VKTX options that are playing the MDGL catalyst, so it would be nice to see data soon. Many traders are still betting on data before Dec16 (based on MDGL volume and option pricing), so we will stick with the VKTX Dec16 strangle for now. If no press release comes by Tuesday of next week, the plan will be to salvage premium and roll out to Jan20 expiration.

Open Positions

* The following Open Positions pertain to the Options In Play trade ideas from this and previous editions. Disclosure of the Trader Co-Author’s actual portfolio holdings, as of the date of each publication, is made below under "Trader Author Portfolio Holdings.".

Trader Author Portfolio Holdings

**As of 4pm ET December 06, 2022