By Dan Darrow

October 25, 2022

Today's Trade Ideas

Symbol: SHOP

Style: Event

Strategy: Strangle


Long Nov04 $28 put

Short Nov04 $24 put

Long Nov04 $32 call

Short Nov04 $36 call

Action Area: $1.70 - $2.10

Comments: SHOP is set up well for a volatility strategy on earnings. We recently were involved with SHOP when the stock traded into the massive year-to-date support level at 30, looking for a decisive bounce or breakdown off of the level. After a weak start to October, SHOP has rebounded quickly ahead of earnings, and now the stock is back at 30, with earnings due out Thursday morning. Historically a volatile name when it reports, SHOP is set up well for an extended rebound (the early September bounce carried it to 35+) or a fast retest of the recent low (23.63), and a move to either of those levels would mean a swing of $5+. The weekly straddle is only pricing in a ~$3.25 move, however, so a short-term strangle is an interesting play. The trade will be targeting a move of $4.5+ over the next week to lock in money. There will be no stop until after the print, and a lack of movement will take a toll on the short-term contracts, so be sure to plan your size accordingly.

Symbol: ALLY

Style: Swing

Strategy: Put Spread


Long Dec16 $27 put

Short Dec16 $22 put

Action Area: $1.35 - $1.70

Comments: ALLY is a bearish trade idea. During a strong stretch for Financials, ALLY has been a notable laggard. A sizable miss on its report last week and weak commentary concerning auto loans led to a break of recent support at 28, and the stock sank down near 25 before finally finding buyers. ALLY has stabilized above the 25 level, but a lack of a meaningful bounce to reset previous support is setting the stock up for lower prices. With a new trading range forming under 28 and the 8day ema close to joining overhead, the stock should begin to slide back to last week’s low (25.33), and a breakdown should lead to a quick extension into the low-20s. The Dec16 put spread will be targeting an initial move to <25.50 to begin locking in money, and the swing trade will have a tight stop above 28.50 or a 30-40% net debit loss, whichever happens first.

On The Radar

FIVN will be on close watch tomorrow. Tech and the Software sector had a strong session today, and recent laggard FIVN rebounded along with the group. It reclaimed the 8day ema during the morning and rallied late to finish near 60, close to the technical stop at 60.50. If FIVN doesn’t retrace lower off the open tomorrow, the Nov18 put spread will likely get stopped out, so we need to keep an eye on the stock early. 

ISEE is impressive. The small-cap Biotech name continues to act great, with a rally today putting it at a fresh 52-week high. The 8day ema has been a key area of support since the late-September bounce began, and that moving average is gradually pressuring the stock higher. The plan will be to watch for a move to 23+ to roll up the Nov18 call spread (or close out depending on the action), and it may come tomorrow following the strong finish today.

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 August 12, 2022