The Bottom Line:
- Peter Resin discusses a butterfly spread strategy for Lululemon that targets the $305-$315 range for a small debit, aiming for a $5 profit.
- Current stock price is fluctuating around the $289-$300 level after recent earnings gaps, with potential support and resistance levels analyzed through Fibonacci retracement.
- Upcoming earnings on June 6th suggest a potential price movement of plus or minus 30 points, giving traders a narrow timeframe to capitalize on these fluctuations.
- Scott Gillum suggests an alternative approach using a credit spread strategy, aiming for a 14% return by selling the $290/$285 put spread and $317/$322 call spread.
- Traders are advised to monitor price movements closely and consider closing positions early if the stock moves significantly as the earnings date approaches.
Understanding the Butterfly Spread Strategy for Lululemon’s $305-$315 Range
Exploring Alternative Options Strategy for Lululemon
Let’s consider a different approach to trading Lululemon. Examining the chart, we see potential plays around the $289-$293 level, where buyers have found value post-earnings. The Fibonacci levels are also showing interesting dynamics, with the stock price below the 120 negative Fibonacci level. There seems to be pent-up buying interest for a move towards the $320-$325 range.
Credit Spread Strategy for Lululemon
To capitalize on potential moves and earnings expectations, a credit spread strategy can be employed. Selling credits above and below the one standard deviation expected move offers an opportunity for profit. By using options expiring by May 31st, selling the 290 and 317 strikes while buying the 295 and 322 strikes allows for a credit of around 61 cents. This trade can yield a significant return on risk capital in a short span of time.
Considerations and Execution
It’s crucial to monitor the stock’s movement relative to the expected range. If the stock starts to deviate significantly, adjustments may be needed to manage risk effectively. With earnings approaching, this credit spread strategy provides an alternative to traditional butterfly trades, offering a chance to profit from Lululemon’s potential price movements within a defined timeframe.
Analyzing Potential Support and Resistance Levels Using Fibonacci Retracement
Analysis of Support and Resistance Levels Using Fibonacci Retracement
After observing the chart for Lululemon, it becomes apparent that there are potential plays around the $289-$293 range post-earnings. The Fibonacci levels exhibit interesting dynamics, particularly with the stock price currently positioned below the negative 120 Fibonacci level. This suggests a possible buildup of buying interest aimed at a move towards the $320-$325 range.
Implementation of Credit Spread Strategy
To leverage anticipated price movements and earnings outlook, a credit spread strategy proves beneficial. By selling credits both above and below the one standard deviation expected move, there exists an opportunity for profit. Utilizing options expiring on May 31st, selling the 290 and 317 strikes while simultaneously buying the 295 and 322 strikes can yield a credit of approximately 61 cents. This trading approach offers a substantial return on risk capital within a short timeframe.
Risks and Trade Execution
Monitoring the stock’s deviations from the anticipated range is essential for effective risk management. If notable deviations occur, adjustments may be necessary to mitigate risks adequately. As earnings draw near, this credit spread strategy emerges as an alternative to traditional butterfly trades, providing a means to capitalize on potential price shifts concerning Lululemon within a specified time window.
Preparing for Earnings Movements Around June 6th
Exploring Potential Price Movements Ahead of June 6th Earnings
Considering the upcoming earnings on June 6th for Lululemon, there’s a potential opportunity for movements in the stock price. Buyers seem interested in the $289-$293 range post-earnings, suggesting a possible play towards the $320-$325 level.
Credit Spread Strategy for Earnings Anticipation
To make use of the expected price fluctuations and earnings outlook, employing a credit spread strategy could be beneficial. By selling credits above and below the one standard deviation expected move, traders can aim for profits. Using options expiring by May 31st, selling the 290 and 317 strikes while buying the 295 and 322 strikes can result in a credit of around 61 cents, offering a favorable return on risk capital within a short timeframe.
Risk Management and Execution of Trades
Monitoring the stock’s movements relative to the anticipated range is crucial for effective risk management. Adjustments might be needed if the stock deviates significantly. As earnings approach, this credit spread strategy presents an alternative to conventional trading approaches, providing a chance to capitalize on potential price shifts surrounding Lululemon within a specific time frame.
Alternative Credit Spread Strategy for a 14% Return
Alternative Credit Spread Strategy for a 14% Return
I’d like to sell credit above a one standard deviation expected move and sell credit below a one standard deviation move. Using the May 31st expiration timeframe, selling the 290 and 317 strikes while buying the 295 and 322 strikes can offer a credit of around 61 cents. This trade could yield a 14% return on risk capital in less than one week.
Potential Play Before Earnings
Buyers have shown interest in the $289-$293 range post-earnings, indicating a possible move towards the $320-$325 level. With earnings approaching on June 6th, there is a window of opportunity for a strategic play utilizing a credit spread strategy.
Risks and Considerations
Monitoring stock movements relative to the expected range is key to managing risk effectively. Adjustments may be necessary if the stock deviates significantly from the anticipated levels. This credit spread approach offers a different avenue to capitalize on Lululemon’s price potential and earnings volatility within a short timeframe.
Monitoring Price Movements and Closing Positions Early
Monitoring Price Movements and Managing Early Closures
Given the potential for price fluctuations and earnings anticipation for Lululemon, it is essential to closely monitor how the stock behaves relative to the expected range. Any significant deviations from the anticipated levels may require adjustments to effectively manage risk and maximize returns.
Utilizing Credit Spreads for Effective Trading
Implementing a credit spread strategy can offer a strategic way to capitalize on Lululemon’s potential price movements and earnings outlook. By selling credits above and below the one standard deviation expected move, traders can position themselves to profit from the stock’s volatility within a specified timeframe.
Risk Management and Trade Execution
Maintaining vigilance over the stock’s movements in comparison to the projected range is crucial for successful risk management. If the stock shows substantial deviations, traders may need to make timely adjustments to mitigate risks effectively. With earnings on the horizon, the credit spread strategy provides an alternative approach to traditional trading methods, presenting an opportunity to benefit from Lululemon’s price dynamics within a defined time window.
