Trade Ideas - July 23, 2017
With IV still remaining low across the market, quality set-ups are hard to come by. Fortunately we are currently in earnings season, so that is where some opportunity lies.
$FB - Earnings this Wednesday. The stock has been an unstoppable force since its last ER when the whole data misuse 'scandal' had little effect on facebook's user base. The stock is at all-time highs and I think that any good news is already baked in to this price, so to speak. I anticipate little movement in price if earnings / user base are in line with expectations and perhaps a significant dip if they are not. Either way, the expected move signaled by the options market is +/- 10pts, or about a 5% move, and I agree with that assessment. An iron condor with short strikes 12.5 points away from the market around the market close on July 25 would be the recommended play.
$TWTR - Earnings this Friday. I anticipate the same scenario for this ER as well, but for slightly different reasons. Twitter has also been on a tear since their last ER, but it's not on the backs of an overreaction to a data misuse 'scandal.' The stock really only started to rip after breaking out above 37 before proceeding to get extremely overbought and pulling back from ~48 to ~43 where it is now. Again, I think a lot of good news is priced in to this ER based on the price action of the last couple months, so if the announced figures are in line with expectations, I expect little to happen, perhaps a return to recent highs at best; if they are underwhelming, I expect a decent drop. The options market is pricing in a +/- 4 point move or just under 10%, which I think is perhaps a bit much for this particular ER, but when you take a look at the past, $TWTR is typically a mover on earnings day. I'd look to sell an iron condor with short strikes 5 points away from the market on Thursday towards the market close, since the company reports Friday morning.