By Dan Darrow

October 18, 2022

Today's Trade Ideas

Symbol: SBUX

Style: Event 

Strategy: Call Spread


Long Nov18 $92.50 call

Short Nov18 $100 call

Action Area: $1.70 - $2.15

Comments: SBUX is set up well for a ramp into earnings. SBUX is scheduled to report on 11/03, and the stock is hovering under key recent resistance in the low-90s. The stock has been in a well-defined uptrend since bottoming in May, and it is coming off a solid beat-and-raise on its August print. In addition, the company had an upbeat investor day in September, which led to a fast pop on the stock to 93+ (though that rally was short-lived). On a clean break of 91, SBUX should build momentum higher into its earnings report, and the Nov18 call spread will be targeting a rally over the next two weeks to lock in money or reduce risk. The trade will use a 30-40% net debit loss as a stop.

Symbol: AFRM

Style: Swing

Strategy: Call Spread


Long Nov18 $20 call

Short Nov18 $25 call

Action Area: $1.55 - $1.90

Comments: AFRM is a quick bullish trade idea. Having recently rode AFRM to the downside (and closed the remainder of the trade into weakness), we know that the 8day ema and 20day sma are key drivers of action, and the stock is beginning to break above both. AFRM traded through both moving averages during the session and closed right at the 20day sma, setting up a near-term run as peers and the overall market rebound. There is an open path to 20.95 to fill the gap from 10/06 and room to the mid-20s if momentum kicks in. The Nov18 call spread will be targeting an initial move to 20.75+ to begin locking in money, and the swing trade will use a tight 30-40% net debit loss as a stop.

On The Radar

The HYG bearish trade started at the beginning of August, and riding the High Yield ETF lower for a few months has worked great. Throughout the weak stretch, the 8day ema and 20day sma have been key levels of resistance, and that is why now we need to pay close attention to the ETF. HYG traded above both yesterday and held above them again today, marking the first clear finish above those moving averages since mid-August. We will need to tighten the stop on the current Nov18 put spread roll down to 73.50 due to a potential near-term change of the bearish pattern, but even if the stop is hit, the overall trade that started in August will still come out as a solid winner. 

We can tighten the stop on S now too. The clean breakdown out of the multi-month trend led to a quick move lower near 20 last week, and after rolling the Nov18 put spread down, the stock has firmed up. S bounced Monday and again today, with the gap higher this morning briefly sending it above the 8day ema. It ended up rolling over and closing underneath that moving average, but we want to make sure to exit the remainder of the trade if it begins to reset above it in the near future. The new stop for the Nov18 put spread will be 23.80 (a rally above today’s high).

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 October 18, 2022