July 24, 2022

Today's Trade Ideas

Symbol: CAG

Style: Swing

Strategy: Long Put

Contracts: Sep16 $34 put

Action Area: $.90 - $1.20

Comments: CAG is a quick post-earnings bearish trade idea. Higher input costs and lower margins took a bite out of CAG’s quarter/guidance, and the disappointing numbers led to a sharp drop lower on the day of its results (7/14). Losing 33.50 put CAG below all of its near-term moving averages, and while it has attempted to stabilize over the past week, it has struggled to reset above those moving averages. The stock is beginning to turn lower as the 8day ema catches up overhead, and momentum should build as it approaches the earnings day low (32.53), with a potential sizable extension underneath it. The Sep16 put will be targeting a quick initial move down to <32.50 to retest the recent low, and the swing trade will have a tight stop above 34.15 or a 30-40% net debit loss, whichever happens first.

Symbol: UPST

Style: Swing

Strategy: Put Spread


Long Aug19 $26 put

Short Aug19 $21 put

Action Area: $1.90 - $2.30

Comments: UPST is a bearish trade idea with a tight stop. The May earnings fiasco was defended by some traders as a one-off anomaly due to wild market conditions, but the recent July warning solidified the fact that growth is slowing quickly for UPST. The stock cratered on the May print, and after recovering some lost ground later in May and June, it put in a new 52-week low following its guidance. Similar to the overall market and many other beaten-up names, UPST rebounded over the past two weeks, but the rally has stalled in the high-20s as it hits the 8day ema and nears the 20day sma, and the stock is beginning to turn lower as overall market momentum cools. The Aug19 put spread will be a shorter-term strategy targeting a quick retracement lower over the next couple of weeks (earnings are on 8/08), with an initial target <24. The swing trade will have a tight 30-40% net debit loss as a stop.

On The Radar

Bad news doesn’t matter until it does. One of the defining characteristics of the recent run on QQQ and SPY had been the ability for indices to shrug off bad (negative) news. A hotter-than-expected CPI reading and less-than-stellar earnings and guidance did not slow down the rally, but that came to a screeching halt Friday. The pullback on QQQ and SPY Friday following some high-profile earnings misses didn’t put either below the 8day ema, but it does make for a critical upcoming week of action. With a massive lineup of earnings due out and the FOMC rate decision on Wednesday, the recent bounce will get an important test, and by Friday’s close, the market could be substantially higher or lower. With large volatility expected this coming week, we will try to stay nimble by taking trades quickly and keeping stops tighter-than-normal. Once the dust settles after the busy week, we can take stock of momentum in the market and get a better feel for which direction to favor (bull/bear) moving forward.

We’ve had several recent strangle ideas and most of them didn’t come right before earnings. Normally, we open volatility strategies the day of/before an earnings print looking for a big move on the event, but lately, the overall market volatility and tight patterns on individual names have created interesting setups outside of events. When it comes to closing the strangles, the positions we have left on as speculative “runners” are the ones where a catalyst is still due out within the options expiration period, so there could be a chance for a big move in the opposite direction (AXP, MRK). If there are no earnings/events, then it is better to close out the entire strangle after a big move in one direction, as the chance of a major reversal is a lot lower.

Positive headlines on Thursday regarding RIVN’s delivery vans for AMZN gave the latter a nice boost, and while it popped quickly to 35+ on Friday, it was unable to hold onto the gains and the reversal was too fast to lock in gains on the Sep16 call spread. RIVN ended up finishing the session red, but still green for the week, and it remains in the steady recent uptrend. The stock has been riding the 8day ema higher since the start of July, and as long as the keeps holding, there should be another quick retest of 34.50-35+ to give a shot to lock in money. The Sep16 call spread has plenty of time until expiration and the trade is developing well, so we will remain patient with the position for now. The technical stop on the trade will remain at 29.25.

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 22, 2022