By Dan Darrow

August 29, 2022

Today's Trade Ideas

Symbol: FL

Style: Swing

Strategy: Long Call

Contracts: Oct21 $37.50 call

Action Area: $2.00 - $2.55

Comments: FL is a fast-developing bullish trade idea. FL had a double dose of good news when the company reported earnings two weeks ago. First, the numbers for the quarter were solid and the guidance for the year was better than feared. And second (and maybe more importantly), the company announced the hiring of a promising new CEO to help lead the company’s turnaround. The stock surged on the day of the print to 40, then pulled back early last week to the mid-30s to backtest the key 200day sma. Buyers stepped in around that moving average on Wednesday, and the stock firmed up Thursday and held steady on Friday. FL had a mixed session today but remained above the 200day sma, and the fast-moving 8day ema caught up underneath to set up a near-term bullish pattern on the stock. With rising support from the 8day ema and a successful backtest of the 200day sma, FL is setting up for a turn higher soon, and the stock should see a move back to ~40 quickly once it begins to turn the corner. The Oct21 call will be targeting an initial move to 39.50+ to begin locking in money, and the swing trade will have a tight stop below 35 (under the 200day sma) or a 40-50% net debit loss, whichever happens first.

 Symbol: Z

Style: Swing

Strategy: Put Spread


Long Oct07 $33 put

Short Oct07 $28 put

Action Area: $1.55 - $2.00

Comments: Z is a bearish trade idea. Ditching the iBuy business late last year may end up being a good move for Z, but it hasn’t helped the stock year-to-date, and now signs are pointing to a sustained downturn in Real Estate, which should further pressure the stock. Z turned in a disappointing report earlier in August, but it came at a time when bad news was being bought aggressively. The stock only finished down marginally after the results, and it put together a strong rally the following session to probe key resistance around 40 and the 100day sma. A lack of sustained buying interest around the 100day sma made for another failed attempt to clear the year-to-date downtrend, and the stock began to slip lower along with the overall market two weeks ago to erase all of the post-earnings gains.  Z broke under the 50day sma early last week and failed to reset above it over the five-day stretch, creating a new lower range and setting up a near-term bearish pattern. The stock now has a path to fill the late June gap (31.75) and potentially retest the June low underneath it (28.61), and the Oct07 put spread will be targeting an initial move to <31.75 to begin locking in money. The swing trade will use a 40-50% net debit loss as a stop.

On The Radar

ATVI may have a busy week. The UK competition committee has been expected to have a ruling on the ATVI/MSFT merger by 9/1, and while not the final authority on the deal (the US FTC is more significant), it could impact sentiment in the near term. With the stock around 79 and well below the 95 negotiated deal price, a positive ruling could help ATVI make a move back into the low-80s, so it will be on our radar the next few sessions. Money has already been removed from the long-dated Jan20 call spread, but it would be nice to see a sustained push into the 80s to ignite some momentum again. 

SNAP’s recent rebound attempt stalled at the 50day sma, and now all of the positive momentum it had a couple of weeks ago has been erased. SNAP’s drop today put it under the 20day sma for the first time since 8/10, and it marks a complete retracement of the move from ~10 to ~12.75. We rolled up the Sep16 strangle twice on the bull side as the stock rallied, but now we need to manage the remainder of the trade more closely. Both sides of the strangle currently have some premium, but the bear portion of the trade is closer to the money and it will be the focus moving forward. We will use a hard stop at 11 for the entire trade, and we will be looking for an opportunity to scale back risk if the stock begins to slide below 9.80 this week.

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 29, 2022