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[Options Premium] I'm Lovin' It.

January 24, 2025

Today's relatively short-term trade has an earnings catalyst, and I'm betting it will propel us to profits.

The stock has already had a stellar run over the past 52-weeks. Will the upcoming earnings mark the top? I doubt it.

Here's a one-year chart of a technology company that specializes in mobile app growth and monetization solutions -- Applovin Corp $APP:

As strong as this stock has been, it looks like it's setting up for another leg higher. And the upcoming February 12th earnings report just may be the catalyst the market needs to send this stock flying again. 

Of course, earnings can be a wild card, so it'll be important to define my risks.

Here's the Play:

I like buying an $APP February 400/450 Bull Call Spread for an approximately $11.50 debit. This means that I'll be long the Feb 400 calls and short an equal amount of the 450 calls. This debit I pay today is the most I can lose in a worst-case scenario:

I'm going to hold this trade, no matter what, through the February 12 earnings event.

On February 13th, my stop becomes $400. If $APP is below $400 per share, I'll close the spread for whatever I can get for it. We'll only have about a week or so until expiration, so whatever premium is left will evaporate rapidly.

I'll leave a resting GTC limit order to sell this spread for $40, which is 80% of the potential full value of the spread. That'll be good enough for me.

If $APP is above $400 following earnings, but we're not yet getting hit on our limit order to exit for a profit, then I'll be begin aggressively trailing a 3-5 day low stop loss level. As always, I'll keep everyone updated on latest stop levels in the ASO chat and in the weekly Jam Sessions.

If you have any questions on this trade, please send them here.

If you missed my most recent ASO video Jam Session, you can catch a replay on Stock Market TV.

~ @OptionsSean

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