By Dan Darrow

November 22, 2022

Today's Trade Ideas

Symbol: MSFT

Style: Swing

Strategy: Call Spread


Long Dec30 $250 call

Short Dec30 $260 call

Action Area: $3.55 - $3.95

Comments: MSFT is a bullish trade idea. After an unusually volatile stretch for the mega-cap Tech names, MSFT is beginning to show signs of stabilizing. Guidance on the October earnings report disappointed, leading to a sharp one-day drop to the mid-240s but then an even quicker move lower the following week into the low-teens. The fast drop was met with a similarly fast recovery, as the stock surged back up into the 240s post-CPI reading. MSFT has now formed a two-week base above 240 and the 50day sma, and the 8day ema has recently caught up underneath to start pressuring the stock to the upside. On a clean break of ~245, MSFT should build momentum for a run to the 250s to fill the earnings gap (250.66), and the Dec30 call spread will be targeting an initial move to 249+ to begin locking in money. The swing trade will have a tight stop below 237 (under the 50day sma) or a 30-40% net debit loss, whichever happens first.

Symbol: EXPE

Style: Swing

Strategy: Call Spread


Long Dec16 $103 call

Short Dec16 $110 call

Action Area: $2.20 - $2.65

Comments: EXPE is a bullish trade idea. A near-term breakout pattern is developing on EXPE. A solid report earlier in November lifted EXPE into the high-90s, but it failed to reclaim the 50day sma and 100day sma before rolling over. Another rally post-CPI sent it briefly above both moving averages and the 100 level, but it struggled to sustain the run again last week, sliding back into the mid-90s. Action has been improving on the stock this week, and today’s rally put EXPE above the top of moving average resistance for the second time in two weeks, and it is setting up a near-term breakout. Once cleanly past 100, EXPE should see a quick retest of the November high (104.47), with room to the teens above it. The Dec16 call spread will be targeting an initial move to 103.50+ to begin locking in money, and the swing trade will use a 30-40% net debit loss as a stop. 

On The Radar

ZM had an inline(ish) report yesterday, and the numbers were not good enough for traders. ZM gapped lower near 75 this morning and sank under 72 during the first few minutes of the session, but it rebounded before breaking recent support at 70-71. The stock closed off its low and under all near-term moving averages, so the next couple of sessions will be key in determining direction. The move did not exceed what was priced in, and it did not drop far enough for the Dec16 $60 - $55 put spread to be in play, so the strangle remained open and unchanged. The plan will be to give ZM until Monday to establish direction, and if it still hasn’t broken below 70-71 (or rebounded into the high-80s), we will adjust/close the strangle.

DG was a speculative, sympathy play on DLTR earnings, and while the latter was hit hard after reporting, DG finished the session down only marginally. DG actually dropped $6+ during the morning today, but we were looking for a $7+ move on the Nov25 strangle, so it was not closed into the weakness. Now following the afternoon recovery, we will need to pay close attention to the action tomorrow. With the contracts expiring on Friday and the stock in between the call and put spreads, we will have to work quickly to close the trade if it doesn’t have a large move tomorrow

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 November 22, 2022