Options Trading Newsletter - Issue #154 - Believe [Options Today - Bullish Earnings Play on HPQ]
Believe...
Believe…
Believe is the cornerstone of success. It fuels confidence, drives hard work, and sustains perseverance through challenging times. Yet, many falter on their journey, not from a lack of effort, but from a shortage of believe—in themselves and the value of their pursuits.
Success in any field, be it trading, entrepreneurship, or creative endeavors, isn't just about the actions you take. It's rooted in the conviction that these actions will lead you to your desired destination. This belief is not unfounded optimism but a foundational pillar for achieving your goals.
Remember, no one achieves greatness in isolation. Along your path, you'll encounter mentors and allies. When you do, embrace their guidance with open arms and an open mind. Believing in the wisdom of those who have walked the path before you can accelerate your journey toward success.
Believe is more than a mindset; it's an action. By believing in yourself, your mission, and those who support you, success isn't just a possibility—it's within reach. Let belief light your way to achieving your dreams.
"Believe you can and you're halfway there." — Theodore Roosevelt
SPX (5088)
SPX continued to move up another 1.7% for the week as market rallied after NVDA released its earnings. NVDA had the one day market biggest move of $277 billion market capitalisation increase. The momentum sizzled a bit with SPX closing slightly down on Friday.
SPX should hold above 5000 and if all works until Wedhesday’s GDP, possibly on its way for next target level of 5200.
Trading range for the week is 5000 to 5200.
NDX (17937)
Although NDX was up 1.4% for the week, the momentum was not sustained on Friday as it closed below the previous high. This week, ZOOM, CRM, HPQ, DELL, LOW and Macy releases its earnings and could give more indication of where the businesses and earnings expectation for the months to come. Any negative data/indicators could bring NDX back lower to fill last Thursday’s gap up at between 17500 to 17900 level. We see 18000 as the next resistance level while 17500 as the nearest support level.
Trading range for the week is between 17500 to 18500.
HANG SENG INDEX (16725)
HSI has broken above the channel resistance and touched 100 MA before retracing before close on Friday. The daily chart has already established a higher high higher low pattern which is positive to garner market participation and volume buildup.
This week, BIDU will release its earnings on 28 February.
We are still looking for buyin opportunity at levels around 16200-16400.
OPTIONS TODAY - BULLISH EARNINGS PLAY ON HPQ
HPQ is going to release earnings after market close on Thursday. HPQ price has been up since early this month and possibly the momentum might continue into earnings. Expected move till 1 March is +/- $1.68 and it is trading now at $29.34 giving a price range of $27.66 to $31.02.
We will use our Butterfly strategy again to trade earnings as it is a very cheap but highly profitable strategy if we get the direction right and if it closes within the trade price range. To determine where the price would land at expiry, we would normally use the expected move value on the option chain.
Trade Entry
Sell 2 Call at strike $30.50 (within the expected move range $27.66-$31.02).
Buy 1 Call above at $31.50 and buy 1 Call below at $29.50
Expected to pay a debit of $0.14-$0.15. Max profit is $85-86 per trade.
Keep the trade until close to expiry. If HPQ move into the butterfly trade range, then the trade will be profitable. The closer it gets to the middle strike of $30.50, the higher the profit and max profit is achieved close to expiry.
If HPQ trades by Friday OTM, leave the trade to expire. If HPQ price trades within the price range, close the trade for profit. Max profit is reached closer to closing time and if the price is close to the middle strike. If HPQ trades above the upper strike, close the trade with a small debit.
OPTIONS TODAY - TRADE STATUS ON BA DEBIT CONDOR
BA is now trading higher at $200.83, lower after one analyst downgraded its target price last week. The selloff had quickly recovered at the end of the day showing that the current level between 200-202 is holding good support.
Our trade is in a slight overall loss but the Bear Call Spread is in a good profit due to the theta decay. The Bear Call Spread is doing its work protecting the overall trade as price moves lower. We would just need a bigger pop in BA price closer to expiry making its price above $205 to get it back to a good profit.
OPTIONS TODAY - POOR MAN’S COVERED CALL ON XLU
XLU is now trading at $61.96 higher than last week. We will be fine if XLU maintains sideway for a while and we will try again to continue rolling the trade up with additional premium if possible.
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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf
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