Posted January 19, 2021
By Scott Stewart
Predicting a Big Earnings Play Winner!
Welcome to the Rude Awakening for January 19, 2021
Were looking at a shortened week, with markets being closed yesterday in honor of Martin Luther King, Jr.
Recording before market open, markets are looking to open strong today, reaching back for recent all time highs.
All technical indicators imply we are looking at an overbought market, but the market continues to push higher.
Kicking Off Earnings Season in Earnest
We are back in the swing of another new earnings season, folks.
The bank stocks are leading the way.
But, the big one for today is Netflix (NFLX).
Reporting after market close today, were looking at options with a 7.9% implied move. This is quite a bit higher than what we typically expect from NFLX upon earnings normally its a 3.3% move.
The at the money options on NFLX show implied volatility of 90%. If you remember one of our early lessons on options, you know that anything above 50% makes it a good juicy premium for an options play. So this one is something of an options traders dream!
We predict earnings will either meet or beat expectations, and so wed look to do a bullish play using options on NFLX.
Some More Bulls on Our Watchlist
Like I said, bank stocks are leading the way this earnings season.
One to watch is Morgan Stanley (MS), projected to open nearly 2% higher this morning. They will be reporting before market open tomorrow, and its showing a 4.4% implied move. The stock is currently priced to perfection, after its recent runup. We might look for a pullback on MS before a potential buy.
U.S. Bancorp (USB) is also reporting tomorrow morning, and in this one we are already starting to see a bit of a pullback. USB is showing a 3.7% implied move pending earnings.
Last but not least is Bank of America Corporation (BAC), which reported earnings this morning and has beat expectations by 2 cents. Even still, its down a little over 50 cents in the premarket, with bearish indicators. We are expecting a pullback to the $30 level.
Lots of activity coming your way this week, folks.
Well continue to find you winners as earnings season continues to ramp up.
Have a great trading day.
Well talk tomorrow!
Scott StewartEditor, Rude Awakening