Last week ended up with a nasty pull and the market felt like it’s ready to reverse its trend and sell off hard. However, we felt that it is unlikely for a major selloff just before earnings season so we started looking for bounce plays on Monday and Tuesday.
The first of mega tech earnings was NFLX which introduced an interesting opportunity: If NFLX does well, it can put a sympathy bid across Nasdaq adding fuel to the “bounce” fire.
Major tech only reports in the following week creating unique non-ER premium plays. Not only they can get a sympathy bid but also tend to “run into ER” as folks pile in with good expectations.
So the play focus was finding mega tech earners in the following week relying on these 3 catalysts:
1. Bounce play on Nasdaq
2. Sympathy play on NFLX ER
3. Run into following week ER
GOOGL has been a strong leader across tech and a perfect candidate. On Tuesday, we were looking for OTM positions on GOOGL and took the following:
We didn’t catch the bottom but looked for the first dip post reversal, red arrow shows where we grabbed them, about 30 min into the open. Typically premiums at the bottom are higher than what you pay on the first pull.
The plan was to catch the pop (if happens) post NFLX ER on the lower strikes and then ride the higher strike into the end of the week.
The plan failed. NFLX had crappy ER and sold off on Wed, however, GOOGL held strong. emphasizing the importance of having more than one potential catalyst is important as nothing is guaranteed and some may not materialize. The more potential catalysts the higher chances of success.
GOOGL continued to drift higher into Thu and being nimble we took some off just before the close. Friday premium decay is a real thing and those positions could easily evaporate overnight.
* clearly a typo and it was AMZN 3650 and not 2650
A few bounce plays worked out really well so we felt it is worthwhile holding risk overnight.
Thu Afterhours SNAP reported stellar earnings that put a bid into the overall digital ad space, including GOOGL. It gapped 30 pts and after short consolidation continued 60 pts higher. There’s a significant risk with playing weekly options especially OTM as it can easily evaporate, but with controlled limited risk the upside is extremely rewarding.
IT IS IMPORTANT TO NOTE THAT MOST PLAYS DO NOT END UP LIKE THIS, IT IS A HIGH RISK / HIGH REWARD AND AS SUCH YOU DO NOT RISK MORE THAN YOU ARE WILLING TO LOSE. A SMALL BET HERE COULD EASILY MAKE YOUR MONTH AND STILL NOT HURT YOU IF IT FAILS.