Exploring #V And #PYPL | Options Playbook Ep. 454 Video ID: JKYeRgAC4ZA URL: https://www.youtube.com/watch?v=JKYeRgAC4ZA Hello and welcome to Options Guy TV. I'm Brian Overby, author of the Options Playbook and your host for about the next 25 minutes here on Options Guy TV. Well, this is the week of earnings. We had over 15% of the S&P 500 index companies in the S&P 500 index report last week. This week we have to start off with in the trade that we're going to look at. I talked about it on Fundamental Friday, but the trade is PayPal. We're going to look at we looked at a cash secured put on PayPal. We'll look at an advanced trade today. We had a little bit of a pullback the stock. So a decent opportunity to try to get bullish going into earnings. And then Visa is going to announce on Tuesday after the close. That's going to be a very interesting one. You'll you learn a lot about the consumer obviously with the credit card companies and and spending debt levels. So good good view into the consumer. A lot of people will be watching that. And then we get into the big ones. We got Microsoft, we got Meta, we got Amazon. Amazon's announcing on a Thursday, which they're always announcing on a Thursday. ADP is in there too. So we get a little bit on the payroll situation with they always have some interesting insight into the worker. And SoFi, Boston Scientific are announcing on the morning on Wednesday. So real full week of earnings. The calendar is full. If you look at every company that's going to be announcing and there are a lot of big ones this week. So let's start off with ConocoPhillips because I do really like the chart on ConocoPhillips. So let's run to the Trade Your Pro software. And I'm going to start by showing showing the screen on Trade Your Pro. Looks like we might have some technical difficulties. Let's go here. There we go. All right. So, I'm riding solo here, but there All right, let's We'll keep it right here. So, if I go to the Trade Your Pro software, here's what we have. We have the ConocoPhillips and we we have a a strong momentum move to the upside. Now, a lot of this has to deal with what's going on in the Middle East. It's all companies are everything that's happening with oil is rising all of the tides. So, we had a a nice breakout here right in this area from 114 up to 122. And now we've had a little bit of a pullback from there, but if I zoom in on this right here, see where my crosshairs are at, you see how many times we came down and bounced off of this area right about what we'll call it 1350, right? So, here's a big a big gap up, came all the way down, and that's that held, held again, held again, held again, and then it finally broke down, and now we've broken out out of that area and we're trading above the 50-day moving average, above the 200-day moving average. So ConocoPhillips is just the momentum is is good. We had a little bit of a pullback but now we're heading into earnings on August 6th. So what did we do? We put on a trade that looks like this in ConocoPhillips where we bought the August 7th expiration 122 strike and we sold the July 4th expiration, I'm sorry, 121 strike and we sold the 122 strike in the July 31st. So when the chart ran up and we got up to right about where the 122 level was and we pulled back. We could have got out of the trade and it was profitable at that point in time but you would have had to been on top of your game. When it comes up to that level would have done really well. We just didn't want it to get into money. So it was a almost ideal in that like let look at where the very I guess the very top of the the it didn't hang out there long but it's the 122.47. So at that point in time you could have gotten out of the trade, you could have closed it off, removed the risk, still did fine or even roll your short option and roll it into a long call spread heading into that earnings report. So that was the the setup that we had. So now we're going to the 31st. We got We got till this Friday, right? That's the 31st, right? So on this Friday um when the front month option contract if it expires then we can just ride the long call option going into earnings and we're going to have this done for a much cheaper price than just buying that option, all right? Uh so right now that option contract uh is at 122. So, we're at 48 cents on that trade. 121. Wrong one that I have here. Oh, August. 121. There we go. Uh it's 202 to 140 178. So, we're looking at 136 to get this entire trade done. So, the trade is working out just fine. When it went up and hit the strike, you could have gotten out. You would have had about a 50-cent gain on the trade. Uh paid uh What did we end up paying for it? About 145. So, 142. So, we can still put this trade on. We still have some time decay to to reach it. It's at 142 on the midpoint right now. And with this trade on the 121, you still got 36 cents. So, you're looking at about 48 cents on the midpoint. Yeah, I still don't I don't mind this trade still at this point in time with 1 week remaining to this expiration. Now, once this option expires, what we'll look to do on the August 7th, either we ride the long call going into earnings, or we can go out and try to sell something right around the one standard deviation move. So, we let the short-term option contract expire. We then go out and sell a longer-term option against it and generate even more income. And we'll cap our upside after the earnings report, but we'll give ourselves uh a buffer. We'll bring in another Well, at this point in time, if we sold the 125 four points higher, we're bringing in 82 cents. We expect implied volatility to go higher as the week as the week ends as we get to that expiration date. And then we're just long a long call spread. So, we're we're still at the same point. We were obviously profitable for a minute, and now that the stock is back to this range, and we're looking at this, we could close this out at 145 right now. So, here's the concept of doing a diagonal around earnings in that you buy the option contract that you think ball is going to go up. So, you buy at the higher implied volatility, and you sell the lower implied volatility, which is counterintuitive. But, the forecast is for the August 7th implied volatility to continue to increase. And we're still only hanging around that 40 level. The front month ball is trading at 39 on the at the money. So, there's still This is a a nice dichotomy to still be able to get this trade done. There's still something worth selling here at the 122 level. So, I like this trade. And and in general, Conoco Phillips has seen some money inflows coming into Conoco Phillips. The chart looks solid. Saw the breakout, a little bit of a pullback, and now we're getting ready for that earnings report. So, I like Conoco Phillips. All right. So, now the trade today, I'm going to look at PayPal. And in PayPal, we got a $56 stock. So, I'm going to look at getting a little bit advanced cuz I I do PayPal has been beaten up. The chart is ugly. Um but, we got the period of consolidation and uh a nice breakout to the upside. So, very choppy chart going back a couple of years, going all the way back to when is this? The 20 2022. So, it's been beaten up, came back, and now we're going to grab right here and look at this section of the chart. And possible takeover rumors, solid move to the upside. This is a golden cross. You got the 20-day crossing over the 50-day. You got the 200-day moving average, broke out above that. So, things are are looking fairly solid in PayPal. And PayPal's going to be announcing earnings. We're going to get some more news tomorrow on the underlying. So, I want to sell a put spread. We sold a cash-secured put, brought in some premium. I'm going to actually sell a put spread on this trade. And I don't actually mind going out and using it that credit to buy a long call. Now, you're worried about the the details of the the rumors about a potential takeover. And that might make the stock just kind of hang. And that's part of the reason why I like the concept of doing a cash or a short put spread or a bull put spread heading into this earnings. Now, we can I'm going to look at 18 days out. We're going to try to go about four points. Sell 145, buy 150. So, bringing in a dollar on four points, about 25%. Let's do the 55. All right. I'm going to Let's look at the chart. 55 is right where that support area is. Okay. So, we're going to sell the 55. And we're going to buy the 50. So, 136 on a five-point wide spread. Yeah, that's a decent amount. 1.36. Divided by five, we have uh almost a third of the width of the spread. Let's go to August. August 21st. 55 sell 50 buy. 142. Yeah, that should do it. So, we're going to go out a little bit longer in time. I'm trying to get a third of the width of the spread, and that is . .28% 1.42 1.5 points wide. Looking at .28. 56 And I hate to go up to the 56 strike, but there's a lot more juice in the 56. Still want to bring in at least a third of the width of the spread. So, let's let's go 156 to 151. See if we go that. 156, so And we're And pulling in 156. 156 / 5 we're looking at .3%. Okay, a third of the width of the spread. So, that's going to be the trade. This is going to be the paper trade for the day. We're trading at 56 51. We're going to actually sell this short put spread going into earnings. And on this trade, let's go take a peek at Let me set it up, and I'll give you the quick readback. But, I've always en- enjoyed PayPal. I always thought that they they they kind of they got beaten up. They've been a You know, they they made internet commerce possible. They were one of the bigger companies that first started in that space. They allow you to trade crypto. I mean, they're they're doing some things. They're shaking and moving. Uh So, speculation from Stripe and Advent International, the company stock has seen significant movement rising 32% in the past month. Uh remain cautious with a direct revenue growth. Okay, so admit that speculation, we might hear some details. But, in general, this is the buyout price is a little bit higher, so than where the stock is hanging at. So, let's sell some of this time premium. Let's capture as much of it as we can. If we get put the stock, I'm okay with that. I don't mind it, but I do want to bring in at least a third of the width of the spread. I don't like the fact we had to go up to the 56 level from the 55. So, I moved everything up $1, but that's I'd I'd rather do the 56. It's got to be worth your time to put the trade on. And we're going to bring in that $1.56 on a five-point wide spread going out 25 days. Vol is expected to collapse after this gets done, obviously. So, if we do this trade, yeah. I I like the PayPal trade trade overall. Now, you want to sell the put spread and go out and buy an out-of-the-money call? That that's feasible. You could take some of that credit and do it. So, for uh the 62.50 strike actually has a lot of open interest, some unusual volume today. So, there's a lot of people that are speculating at this strike. And you see a lot of these option contracts are just kind of jumping out at you. So, I don't mind selling this put spread to buy a long call, but that's not going to be the paper trade today. We're just going to sell the put spread. Take this opportunity to grab some of this volatility premium going into the earnings report and see if we can capture it and see if the stock just kind of stays where it's at based off of the rumors of the potential takeover. Now, a lot of risk that you we could hear more of it that oh, we're not if they just come out and say we're not selling and these rumors aren't substantiated then, you know, that could hurt the stock or no comment that could also maybe hurt the stock. But, this is where we're going to leave it right now. Okay, here it is. PayPal. PayPal's announcing earnings tomorrow, July 28th. Stock is trading at $56.48. It's up $0.32 on the day. We're going to look to get bullish on PayPal by selling a short put spread ahead of that earnings report. So, we're going to go out to the August 21st expiration, 25 days away. We're going to sell the 56 strike put and at the same time buy the 51 strike put. The midpoint on this trade is $1.56. And we're going to send it down to the trading floor for $1.56. This is going to be a an order that we're going to work it a little bit. If we can't get the 156, we got a little fairly wide bid-ask spread. We'll we'll adjust it, make sure that that we get that trade filled before the end of the day. And boom goes the dynamite. Order has been sent. Now, let's go back and look at a couple of trades that we did last week. We had the the PayPal trade. I don't mind looking at Visa. I don't really like the chart on Visa. There's nothing really jumps out at me on Visa, but I think we're going to uh I'll set up an open wing butterfly. I don't I like the situation. $300 stock uh You know, they are announcing on a Tuesday. I'd rather have it be a Wednesday or a Thursday, but you got one extra day worth of trading. So, I let's go a little bit different on Visa. Instead of just doing the short-term trade, uh is Google bonds back at all today? Cuz we did have Google on. Yeah, now it bounces back, of course. Uh we can uh adjust the Google trade that we had on, too. But, 328 say and I knew Google would bounce back. But, that But, at least we we had two trades on. That was a buying opportunity on that that sell-off. So, we started at 345. We still need We still need a a solid move more. I It's right at the 200-day. I I think this is a good buying opportunity in Google if you want a chance to get long on it. Let's look at Visa. Let's do something similar. Let's go out 18 days on Visa. And we're going to give ourselves some strong momentum to the upside. We're going to look at the 370. Go up to the 390. We're going to sell two of those. We're going to give us 20 points. And then we're going to go to the 400 and buy one. $4 and 20 points wide going out 18 days. Means our max upside is six above 400. Yeah, I don't mind this one at all. What happens if we actually go one more What if we go 15? All right, I'm going to send this to the what-if calculator. I think this is the one that I would do, but let me adjust and let's see if we go just a little bit further out and look at the 395. Let's make this 395 and make this 405. Five bucks. And then we are That's not too bad. That's not too bad of a trade-off. And a dollar more I'm going to get a little bit We're going to get a lot more upside if the stock were to rock all the way up to uh the the highest strike up to 405 strike. So, if we get all the way up here, we can make a thousand paying five dollars paying five hundred dollars to make a thousand. Uh up here, we can make two thousand paying five hundred dollars for that potential. Somewhere in between here 350 to 395, we still land through 370 to 395. Stock is at 363. The expected move is uh we'll call it 20 bucks. So, uh three 385 is in play. That's about the 17 delta. That makes sense. It's usually goes hand in hand. And we have a five dollar trade here. So, if you want to go a little cheaper this butterfly and I'll send this to the ticket. Let me move it up a little bit. So, that's four dollars. So, you save a dollar. I like the five dollar one. I So, here's this is the butterfly I would do. So, uh if if we have this 495 Yeah, 495. Send that one to ticket. I like the five dollar one better. Buying the the August 14th expiration. So, we're going to give this a little bit more room to run to the upside. Financial stocks have been doing well. The chart there's nothing interesting in the chart in me. So, this is 100% on earnings. I like PayPal's chart a lot better and the and the potential news, but if we look at Visa, there's just a little bit of noise in the middle here. I got some resistance here at 375. So, that potential is there. So, we did have a period of consolidation, little dip to the butt downside, but right in here there's nothing too exciting going on. This is a golden cross where we had the 50-day going over the 200-day, and that's a solid sign that we got all of our ducks in a row, but the financial area has been strong. So, 362, we obviously need to break through the 365 level, and then the next stopping point potential is the the most recent high, which is all the way back up here, 374. This is not too shabby. Not too shabby. I don't mind this trade in Visa. And we'll come back and we'll look at this trade next week, but we're going to make it the $5 one. We're going to look at buying the 370, selling two of the 395s, and buying the 405. And part of the reason why I don't mind going up and paying a little bit more, we're going out 18 days. We're not doing the 4-day option contract. We're going to go out 18 days, we're going to give this a little bit more room to run to the upside, and that's where I'm going to leave it. All right, let me see if do if you have any questions, please do put them in the chat box. I'm happy to address them. So, the summary that we have. So, we went in, looked at PayPal, we're going to sell a short put spread over takeover rumors in PayPal. Expect the stock to kind of stay where it's at or potentially go higher, and uh PayPal has had just solid solid report overall, but the stock has really been beaten up. It's actually trading at fairly low PE overall, and I think that's why the the potential rumors are there. The big thing that could happen in PayPal is they could come out and and just say, "No, we're not looking to sell." That that is a a major risk of an earnings report and the questions that they're going to get asked after that report. But, I do like selling that volatility, trying to bring in some of that premium today. Then, also looking at Visa which is going to announce after the close tomorrow. So, PayPal is before the open and uh uh Visa is after the close, and I want to confirm that. Uh PayPal is before and Visa is after. And then, uh on Wednesday when we come back, we're going to have Microsoft, we're going to have Meta, we're going to have Amazon. So, we'll look at doing some fun trades on Wednesday cuz we got a lot of different opportunities to talk about. I don't see any questions in the chat box. So, with that said, that's going to be it for this edition of Options Guy TV. We'll see you this Wednesday 11:00 a.m. Eastern Time for the next edition of Options Guy TV inside the hub. Trade your hub.trader.com. Please check it out if you haven't already and get access to all the great speakers that uh Trader has put together, the whole gaggle of options experts and stock trading experts. So, uh hope to see you in the hub this Wednesday at 11:00 a.m. Eastern Time. Thanks for stopping in. You know how the financial world goes. Here comes the buzzkill. Please make sure to take some time to read this boring disclaimer. We will owe you one.