July 17, 2022

Today's Trade Ideas

Symbol: AMZN

Style: Swing/Event

Strategy: Call Spread


Long Aug05 $115 call

Short Aug05 $120 call

Action Area: $1.75 - $2.15

Comments: AMZN is a bullish trade idea. The last few quarters for AMZN give no reason to be positive into earnings at the end of July (7/28), but the stock is setting up for a near-term breakout nonetheless, and momentum could build quickly over the next couple of weeks. AMZN’s ramp into the split date in early June carried the stock into the mid-120s, but just as quickly as it seemed to be improving, momentum swung fast to the downside. The drop the following week wiped out all of the pre-split gains, and it put the stock into the 101-102 support range for the third time in two months. That area of support has proven to be significant, and enthusiasm around Prime Day (though tempered from previous years) and an overall market rebound have helped lift AMZN back into the low-teens and the key 50day sma. Following a clean break of the 50day sma Friday, AMZN has an open path to the July high (116.99), and the Aug05 call spread will be targeting a move higher over the next week to lock in money or reduce risk. Because of the shorter-term options, the trade will use a 30-40% net debit loss as a stop.

Symbol: RIVN

Style: Swing

Strategy: Call Spread


Long Sep16 $35

Short Sep16 $40

Action Area: $1.30 - $1.65

Comments: RIVN is a bullish trade idea. A polarizing name, RIVN has been locked in a battle between bulls and bears for a couple of months as it attempts to turn the corner after a huge drop. RIVN collapsed into its earnings release in early May, going into the print at cash levels, but it snapped back to the high-20s after the numbers were better than feared. Sustaining rallies above 30 have been a struggle since that initial bounce, but the stock has had a strong July and is beginning to show signs of turning the corner. RIVN broke through 30 and the 50day sma two weeks ago, and it spent this past week consolidating above the key level. A quickly rising 8day ema has helped set a higher floor, and now with previous resistance turning into support, RIVN is set up well for a breakout. There is an open path to 36+ to test the 100day sma, and the Sep16 call spread will be targeting an initial move to 34.50+ to begin locking in money. The swing trade will have a tight stop below 29.25 or a 40-50% net debit loss, whichever happens first.

On The Radar

Our next Option Session is tomorrow (Monday 7/18), and we have lots to catch up on following the busy past week of news. The market is searching for direction, with lots of back and forth trading, and we will discuss how that impacts options and positioning. Also, we will spend time breaking down the next two weeks of news/events, as we enter a very busy stretch. I hope you all can make it!

Mixed signals are piling up. The key event of the week (and possibly the month of July) was the CPI reading on Wednesday, and while the headline number was worse than what the market was expecting, indices and stocks reacted better than traders anticipated. QQQ and SPY started the week with selling, but they wrapped up the week with buying, and with both back above their 8day ema and 20day sma, bull patterns are beginning to emerge again. The main issue is that news flow (earnings and economic numbers) continues to be lackluster, so while stocks continue to recover from negative headlines, rallies are hard to sustain because of the constant barrage of guidance cuts and weak/hot economic readings. With another busy week of earnings coming up, it will be important to see more upbeat reports, or QQQ and SPY may struggle to break out of the multi-month downtrend again. It’s easy to get spun around on both sides during choppy, back-and-forth action, but the way to counteract that with options is to keep stops tighter and push option timeframes out longer. Also, if we start to see volatility expand after companies report, we will take some shots on earnings plays. 

We are going to tighten the stop on the HACK Sep16 call spread roll up. The strong run at the end of June gave a great opportunity to lock in a nice chunk of gains on the initial call, but HACK has struggled to find direction since then. The back and forth action has made for a choppy couple of weeks, and it finished down sharply this past week to put it below key moving averages. The Sep16 call spread still has plenty of time, and if HACK can reset above 47, the pattern still has potential, but we will place a new technical stop at 44.75 (under Thursday’s low) as a break of that could start a steady slide back to the June low. 

DKNG had a big session on Friday. The nearly 15% run started early and continued throughout the day, with steady buying right into the close. DKNG finished a few cents above the 50day sma for the first time since late June, and if it can build on the momentum this coming week, a significant breakout seems likely. The longer-term Nov18 call spread is targeting an initial move to 14+ to begin locking in money, but if the position is up 80-90% before that target, we may roll up sooner. 

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 July 15, 2022