This Stock is Set to Soar

Trade war? What trade war? The escalating rhetoric between the U.S. and its trading partners has had little noticeable effect on global aerospace giant Boeing (NYSE:BA). But the key to this earnings season is going to be guidance.

Given activity at the recent Farnborough airshow, Boeing is set to soar even higher.

England’s Farnborough airshow is a week-long, biennial event that combines a major trade exhibition for the aerospace and defense industries with a public airshow.

Basically, the biggest names in the aerospace industry come out to show off their latest advances and innovations in order to convince prospective buyers to pony up on shiny new planes.

This year, orders were up 50% over 2016, totaling more than $192 billion.

Boeing led the way at Farnborough, raking in orders totaling $92 billion — or about 676 orders total.

The influx of orders bodes well for Boeing heading into Wednesday’s quarterly earnings report. Currently, Wall Street is expecting a profit of $3.35-per-share from Boeing, up from $2.55-per-share a year ago. Revenue is expected to rise 5.5% to $24 billion.

The whisper number, however, comes in at $3.59-per-share — well above the consensus estimate.

Hitting the whisper number alone could spark a post-earnings rally in BA stock. Combine that with solid guidance, and the shares could be headed sharply higher as the remaining bearish sentiment unwinds.

Currently, Thomson/First Call reports that 11 of the 25 analysts following BA stock rate it a “hold” or worse. The 12-month consensus price target rests at $398.04 — a roughly 12% premium to Friday’s close. Both readings leave room for upgrades and price target increases.

Turning to Boeing’s options backdrop, we find more bearish sentiment lingering on BA stock. Currently, the weekly July 27 put/call open interest ratio arrives at 0.75, indicating that puts are more heavily favored than usual ahead of earnings.

Finally, July 27 implied volatility is pricing in a potential post-earnings move of about 4.4% for BA stock. This places the upper bound near $370, while the lower bound rests near $340.

Two Trades for BA Stock
Call Spread: Once again, BA stock is in solid shape heading into earnings. The shares are dipping a bit ahead of Wednesday’s report due to broader market pressures, but this puts BA options traders in good shape heading into the event.

Traders looking to capitalize on a potential post-earnings rally might want to consider an Aug $360/$365 bull call spread. At last check, this trade was offered at $1.78 cents, or $178-per-pair-of-contracts. Breakeven lies at $361.78, while a maximum profit of $3.22, or $322-per-pair-of-contracts, is possible if BA stock closes at or above $365 when August options expire.

Put Sell: For those with a more neutral-to-bullish stance on BA stock, an Aug $320 put has plenty of potential. At last check, this put was bid at $1.85, or $185-per-contract. The upside to this put sell strategy is that you keep the premium as long as BA stock closes above $320 when these options expire. The downside is that should BA trade below $320 ahead of expiration, you could be assigned 100 shares for each sold put at a cost of $320-per-share.

— Joseph Hargett

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Source: Investor Place