With stocks continuing to skirt the stratosphere, finding lucrative opportunities is as easy as falling out of bed. Particularly for those engaged in options trading. If anything, earnings season provides more chances to discover actionable setups due to the elevated volatility.
Companies pleasing the street with their quarterly numbers are often gifted with monster overnight gains. Just look at the tech titans that rallied on Friday.
My weekend market perusal revealed two such recent earnings winners that appear poised for more upside. Today’s other selection recently broke out of a four-year base and is providing an attractive pullback setup.
Behold three of the best trades on the street.
Options Trading: Cabot Oil & Gas Corporation (COG)
Cabot Oil & Gas Corporation (NYSE:COG) shares certainly haven’t established the cleanest trend, but an attractive breakout is looming nonetheless. As is so often the case, its recent strength was born of a solid earnings announcement that delivered a monster rally on Friday.
Heading into the event, COG stock was 11% off its recent highs as profit-takers decided to head for the hills before earnings.
It turns out their exit was premature. With last week’s surge, COG has returned to overhead resistance and looks primed to pop. The significance of the $27 level can’t be overstated. It’s kept a lid on the stock for two years now, so a break above it will spell a sea change. Those with a penchant for options trading should consider the following trade.
Buy the Jan 26 calls for around $1.80. You could pull the trigger now in anticipation of the breakout or wait for COG stock to rise above $27.30 first.
Options Trading: First Solar (FSLR)
We continue our look at quality post-earnings plays with First Solar, Inc. (NASDAQ:FSLR). The popular solar stock scored a ridiculous breakout candle on Friday amid monster volume.
The one-day pop carried FSLR shares 20% higher by the closing bell. Aside from the fact that the rally was “ginormous,” it also completed a three-month base that had the stock digesting the gains from earlier in the year.
Traders waiting for a breakout from the base were buying with both hands and feet on Friday. While we may see some giveback in the days ahead, any and all dips are a buy here. The positive earnings momentum should continue to propel the stock higher during the coming quarter.
Due to its elevated volatility, option contracts are offering satisfying premiums for those willing to sell them. If you’re ready to bet FSLR sits above $47.50 for the next six weeks then sell the Dec $47.50 puts for 85 cents or better.
3 of the Best Trades on the Street: General Motors (GM)
General Motors Company (NYSE:GM) rounds out today’s trio with a solid setup for options trading. The auto giant recently broke out of a four-year base amid heavy accumulation.
The groundswell in participation suggests the range departure is the real deal and the new uptrend will go the distance. And that has us interested in buying any and all dips.
And what do you know — GM stock is gapping lower this morning to provide just such an opportunity. With its implied volatility remaining elevated this strikes me as a perfect opportunity to sell puts.
If you’re willing to wager GM sits above $40 at December expiration, then sell the Dec $40 puts for 47 cents or better.
As of this writing, Tyler Craig held bullish positions in GM and FSLR. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.