GPSAfter gap down, Up trend start, now UP triangle formed
If price break out @32.40, we can see continuation of the up trend
Always remember about false break - if false break out of @32.40 happens and the price will return back into the triangle, you need to close position immediately.
GPS
THE WEEK AHEAD: HD, CSCO, TGT, BBY, WMT, GPS, AMAT EARNINGSWe have bevvy of retail earnings announcements next week as the full season tapers off:
HD announces earnings on Tuesday before market open with a background implied volatility of 23% (top quarter of 52-week range).
CSCO -- Wednesday before market open with a background of 27 (near 52-week high).
TGT -- Wednesday before market open, at 36 (top quarter of 52-week range).
BBY -- Thursday, before market open, at 53 (near 52-week high).
WMT -- Thursday, before market open, at 25 (near 52-week high).
GPS -- Thursday, after market close, at 44 (above middle, but below top quarter of 52-week range).
AMAT -- Thursday, after market close, at 41 (near 52-week high).
I generally prefer playing earnings where the background volatility exceeds 50%, and it's in the top-quarter of its 52-week range, implying that the best candidate for an earnings contraction play would be BBY with AMAT close behind/worth watching for an increase in implied volatility running into the announcement.
Broad-market exchange-traded fund-wise, there isn't much to play: the Brazilian exchange-traded fund continues to print implied volatility percentages at or above 30% (currently, 35-ish), followed by the petro exchange-traded fund, XOP (34).
For non-earnings individuals, TEVA (72/upper end of its 52-week range) continues to garner my attention, along with CTL (56), which -- post-earnings -- maintains high volatility.
The majors -- well, there isn't much to look at. IWM leads with a background implied of 16, which is basically tied with the QQQ's at 16. SPY comes in at a paltry 13 ... .
On the volatility product front, the first /VX future trading at or above 16 is out in May (184 DTE), meaning that a <90 DTE VIX Term Structure trade isn't in the offing for me. However, the VXST/VIX ratio finished Friday's session somewhat elevated (.92), so it's worth keeping an eye out for any >1.00 pops in which to consider Contango Drift trades, particularly as we wind into a rollover with VIX spot trading at 11.29 relative to the Nov contract's 11.60 (2 DTE).
TRADE IDEA: GPS 21/25/25/29 IRON FLYHigh implied volatility rank, high implied volatility, earnings/volatility contraction play ... .
Metrics:
Max Profit: $203/contract
Max Loss/Buying Power Effect: $197/contract
Break Evens: 22.97/27.03
Delta: -6.38
Theta: 2.03
Notes: I'll shoot to take this off at 25% max profit ... .
TRADE IDEA: GPS JULY 1ST 17.5 SHORT STRADDLEOne of the few earnings plays this season that meets my >70 implied volatility rank, >50 implied volatility criteria -- GPS. It announces on Thursday after market hours, but I won't have time to fiddle with it then, so I'm shooting for a fill here. I looked at both an iron condor and a short strangle, but those didn't have enough juice in them to make them worthwhile given the price of the underlying. I'm also going farther out than usual for an earnings play, as I generally like to give straddles greater leeway to work themselves out with time (although I'm naturally hoping we get beaucoup volatility contraction post-earnings such that I can take it off fairly immediately).
Metrics:
Probability of Profit: 56%
Max Profit: $208/contract
Max Loss/Buying Power Effect: Undefined/~$350
Theta: 2.24/contract
Delta: -3.3/contract
Break Evens: 15.42/19.58
Notes: A short straddle is a short call and short put at the same strike ... . Unlike a strangle, I'll look to manage this at 25% max profit because the "profit zone" is somewhat narrower as compared to an iron condor or short strangle ... .
