By Dan Darrow

October 24, 2022

Today's Trade Ideas

Symbol: GOOGL

Style: Event

Strategy: Strangle


Long Nov04 $106 call

Short Nov04 $110 call

Long Nov04 $98 put

Short Nov04 $94 put

Action Area: $1.85 - $2.30

Comments: GOOGL is set up well for a volatility strategy on earnings. Better-than-feared earnings at the end of July helped GOOGL bounce off (at the time) key support at 105-107, but a month later, the stock was back into the support area as the overall market turned lower. September led to a decisive break of 105-107 support and a move into the mid-90s, but it firmed up in October and has been consolidating around 100 most of the month. With earnings due out after the close tomorrow, GOOGL is at a key level and set up well for a large move on the numbers this week. The next major area of support underneath 100 is down in the high-80s (late 2020/early 2021), while there is a path to 109-110 above should the results lead to another rebound this quarter. The weekly straddle is pricing in a ~$6.50 move, but there appears to be a path for a larger swing in either direction. The Nov04 strangle will go out an extra week (and will also capture the FOMC rate decision on 11/02) and will be targeting a move of $7+ either way over the next two weeks. The trade will not have a stop until after the numbers are released, and a lack of movement will take a toll on the short-term contracts, so be sure to plan your size accordingly.

Symbol: TGT

Style: Swing

Strategy: Call Spread


Long Nov25 $165 call

Short Nov25 $172.50 call

Action Area: $2.80 - $3.30

Comments: TGT is a fast-developing bullish trade idea. Defensive-oriented Retail names are waking up, and TGT’s strong start to the week put it above an important level. TGT found resistance at the 100day sma on the initial test in mid-August, and it saw sellers at it again a month later in September. The stock finally broke above that moving average last week, but the bounce stalled around 160 and the 50day sma. TGT formed a higher base Wednesday through Friday, then turned higher today to clear both 160 and the 50day sma, removing near-term resistance and opening the stock up for a run. There is a clear path for a move to the 170s now, and the Nov25 call spread will be targeting an initial move to 168+ to begin locking in money. The swing trade will use a 30-40% net debit loss as a stop.

On The Radar

Bitcoin and BITO just don’t want to move. Bitcoin spent another week and another weekend range-bound, and the lack of a decisive move over the past few weeks is taking a toll on the BITO Nov18 strangle. The trade is at a tough crossroads. One on hand, a resolution of the increasingly tight consolidation should lead to a large, fast move, which is exactly what we want for the volatility strategy. On the other hand, though, there is no indication of when the resolution will come, as recent market-wide catalysts have failed to move Bitcoin. The plan for the Nov18 strangle will be to give the trade until next Monday (10/31), and if it still hasn’t put together a sustained move one way or the other, we will roll out the position. 

ADBE will be on close watch tomorrow morning. A strong start to the week sent ADBE sailing into the mid-teens, and the afternoon run capped the Nov18 call spread roll up. While the stock is trading above 315 and the top of the spread, the position is not close to max value ($5.00), so it made sense to see if continuation higher tomorrow helped the position realize more value. If ADBE pulls back, though, the plan may be to quickly roll up to higher strike contracts to ride the rebound. Keep an eye out for an early update on this one 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 October 24, 2022