Shortly after the open today, I filmed my weekly In The Money segment with Fidelity Investments. Click below to watch and see my notes below the video:
Here are my notes from today’s show:
Macro: Earnings as good as it gets for a while? Is inflation running too hot? WIll investors not believe the Fed that they can stay too dovish for too much longer? Is investor sentiment just way too hot? Also running hot, the relative strength of the SPY, the etf that tracks the S&P 500. Might be time to consider short-term portfolio protection.
Hedge Idea: SPY ($418) Buy June 415 – 380 put spread for $6
-Buy to open 1 June 415 put for $8.50
-Sell to open 1 June 380 put at $2.50
Break-even on June expiration:
Profits of up to 29 between 409 and 380 with max gain of 29 at 380 or lower
Losses of up to 6 between 409 and 415, with a max loss of 6 above 415
Rationale: This trade idea risks 1.5% of the SPY, has a break-even down 2%, and a max gain of nearly 7% if the SPY is down 9% in a little less than 2 months.
Bullish Trade Idea: Long AirBnb (ABNB). The company should report FQ1 results in mid-May. The quintessential re-opening trade, just in time for their guidance for the summer months where Americans are eager to hit the road. The stock bounced off of support near $165 last week, a beat and raise, with 25% short interest and this stock is headed back towards prior all-time highs. I want to define my risk to that technical support level:
Trade Idea: ABNB ($180) Buy May 180 – 215 call spread for $7
-Buy to open 1 May 180 call for $8.60
-Sell to open1 May 215 call at $1.60
Break-even on May expiration:
Profits of up to 28 between 187 and 215 with max gain of 28 above 215
Losses of up to 7 between 180 and 187 with a max loss of 7 below 180
Rationale: This trade idea risks 4% of the stock price, with a profit potential of up to 16% if the stock is up 20% in a month.
Lookback: Last week, I detailed a bearish trade idea in AXP into their Q1 earnings report:
AXP (~$147) Buy May 145 – 130 put spread for ~$3
The stock initially dipped to $140 but then has since bounced back to the high end of its recent trading range. The premium is now just below 50% of the price of the original premium spent and it makes sense to consider cutting one’s losses. The stock is facing some technical resistance at its prior high from Feb, but rallying in the face of Friday’s bad news is… bullish.