3 Top Stock Trades for the Week Ahead of Their Earnings

This week marks one of the busiest five-day streaks of the entire earnings season. In face, more than a thousand companies are reporting their quarterly numbers — giving options traders a metric ton of tickers to play with. Therefore, in today’s edition of our top stock trades, we’re focusing on three of the most popular tech stocks in the market.

Collectively, earnings announcements provide unique circumstances to trade around.

They’re binary events with the potential to generate significant gains or losses overnight.

And rather than flip a coin and bet on direction, the options market provides many strategies that can stack the odds in your favor.

Their success is more dependent on how much the stock moves rather than which direction.

That said, here are three of the most tempting targets for this week:

  • Amazon (NASDAQ:AMZN)
  • Apple (NASDAQ:AAPL)
  • Advanced Micro Devices (NASDAQ:AMD)

So, with all of that in mind, let’s analyze how much movement is being priced in and my preferred way to play them.

Top Stock Trades for the Week Ahead of Their Earnings: Amazon (AMZN)

Source: The thinkorswim® platform from TD Ameritrade

Last week’s pullback in the Nasdaq Composite took some of the fluff out of tech stocks. And with the selloffs we saw after Microsoft (NASDAQ:MSFT) and Netflix (NASDAQ:NFLX) reported earnings, traders decided to ring the register in the other mega-cap leaders before their announcements. This arguably reduces the risk of larger drops, and has me more willing to lean bullish into the events.

That said, Amazon is scheduled to report on Thursday night (July 30), and enters the week testing its rising 20-day moving average. And, aside from Intel (NASDAQ:INTC), most of the other popular tech names have been moving in line or less than expected. That gives me some confidence in building short volatility trades around today’s selections.

The options market is pricing in a move of $195 or 6.5%. I have two trade ideas for AMZN stock, one bullish and one neutral:

Bull Put: Sell the Aug. $2600/$2590 bull put spread for around $1.50.

Iron Condor: Sell the Aug. $2,530/$2,520 bull put and $3,490/$3,500 bear call for a net credit of $1.80.

Apple (AAPL)

Source: The thinkorswim® platform from TD Ameritrade

Apple’s peak-to-trough retracement reached 11% before buyers emerged in force on Friday. The intraday rebound created an impressive bullish hammer candle that showed buyers jammed prices higher into the close. Anything can happen between now and Thursday evening’s report, but I’m encouraged by the end of week action.

Even if AAPL stock sells off after earnings, I’m willing to bet dip buyers return before the drop gets too significant. Ultimately, my bias and trade ideas for Apple mirror my thoughts on Amazon. The options market is pricing in a move of $15.60 or 4.2%. And if prices change substantially before now and Thursday, modify your strike selection accordingly. In general, we’re going as far out-of-the-money as possible and selling a $5 -wide bull put for 50 cents to 75 cents.

For the iron condor, the objective is similar, except I’m shooting for closer to $1. If you’re willing to lean bullish into earnings, then go with the bull put. If you’d rather wager that Apple shares move less than expected, then go with the condor.

Bull Put: Sell the Aug. $340/$335 bull put for 75 cents.

Iron Condor: Sell the Aug. $340/$335 bull put and $400/$405 bear call for around $1.40.

Top Stock Trades for the Week Ahead of Their Earnings: Advanced Micro Devices (AMD)

Source: The thinkorswim® platform from TD Ameritrade

Advanced Micro Devices took flight Friday after Intel’s earnings report signaled they were ill-equipped to compete. By day’s end, AMD stock had gained 16.5% — rocketing to a new record of nearly $70. However, even how much it won last week, I suspect that even if they report great numbers, we won’t see another massive jump.

But, if it somehow stumbles after the event, there’s no doubt AMD stock will be a lay-up buy. Its price chart is incredibly bullish, and the old resistance near $60 that held for months and months is now liable to be a major support zone. That’s if we even retreat that far.

Overall, any weakness on Monday or Tuesday ahead of Tuesday evening’s report would be a gift. The options market is pricing in a move of $6.50 or 9.4%. My top stock trades idea is a naked put.

Naked Put: Sell the Aug. $60 put for $1.55.

— Tyler Craig

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Source: Investor Place