Hey there, Power Profit Traders!
Have you ever driven somewhere new and your GPS gives you the wrong direction, causing you to get completely lost?
Today I want to talk about a different GPS, Gap Inc (GPS) – except our direction was spot-on and we closed this trade yesterday morning for a nice profit!
Let me back up a bit…
By now you’ve probably heard that Operation Surge Strike members receive trade ideas from my A.I.-powered program, BRUTUS, which scans thousands of optionable stocks every day for “trigger events.”
I take that list and vet each one for the best setups, and those are the trades I send to my Surge Strike group!
On Feb. 16, I sent this message about GPS (including the chart below):
“Apparel retail giant, GAP (NYSE: GPS) has earnings coming up on March 3, 2022 after market close (AMC). Over the past 2 earnings periods, GPS has dropped into earnings accompanied by a MASSIVE IV Surge. Yesterday, the stock was downgraded by Bank of America, adding fuel to the historically downward trend into earnings.
Over the past 2 earnings seasons, buying puts on GPS 15-days before earnings has produced an average 137.24% ROI along with a massive 345.47% IV surge. Both stock movement and IV rush provides us a great 1-2 punch to profits over the 2 weeks.”
Gap Inc (GPS) Stock Historical with IV – Feb. 16
Yesterday morning, Surge Strike members were reminded to close GPS puts for $2.25 or better, which was a 73% gain over our recommended $1.30 entry price!
From Jan. 1 to the end of February, if you’d traded these ideas, your account would have grown 364%, or over 4.5x your starting amount!
That statistic doesn’t even include the Surge Strike trades we closed so far in March, and put buying isn’t the only way to bet bearishly with options, as I’ll show you today…
In fact, there’s a way to capitalize on a stock’s POST-earnings moves, too.
Put buying is ideal when implied volatility (IV) is relatively low, because that means option prices are relatively low.
But what if IV is expensive, like in today’s Power Profit Trades watchlist?
There’s an options strategy for that, too, and BRUTUS points us to potential trade opportunities all the time, like a recent trade on Sea Ltd (SE).
On March 1 an opportunity presented itself on SE, and I sent this message to Surge Strike members (including the chart below):
“Digital entertainment, e-commerce and payments provider, Sea Limited (NYSE: SE) disappointed analysts this morning, announcing mixed earnings which included a larger loss in earnings per share (EPS) and a forewarning of market headwinds that will negatively impact future digital entertainment revenues.
The stock tanked on the news.
The prior day’s action occurred on a large Volume Surge. Today, SE breached yesterday’s low, signaling a bearish entry.
Implied Volatility (IV) is huge, allowing us to sell a credit spread offering a 100% potential profit over the next 10 days.”
Sea Ltd (SE) Stock with IV – March 1
As part of the trade ideas, I also include all the relevant trade information – most of which was provided by BRUTUS, like what type of trade to open, what the target should be, and the date that the trade should be closed if the target is not reached.
In this case, we were opening a Bear Call Spread, selling to open the $132-strike call and buying to open the $133-strike call expiring March 11, resulting in a net credit.
The next day we hit our 80% profit target and the position was closed!
If you are interested in learning more about Operation Surge Strike and how you can receive these trade ideas right as they are happening, here’s that link again:
CLICK HERE TO LEARN MORE
I’ll be back next week for Power Profit Trades LIVE on Monday at 11:30 a.m. ET where we will be discussing cryptos and a whole lot more!
Tom Gentile
America’s #1 Pattern Trader
