Broad strokes on Broadband

Sean McLaughlin
February 10, 2021

Like many people, we've been geeking on short squeezes lately. There's been so much action in heavily shorted names.

Pity the fools who are shorting stocks that are at or near all-time highs. If they want to try to be Heroes, be my guest. But we're smarter than that. We'll use these hurting shorts as fuel to catapult our trades higher. I recently got into Live Person $LPSN and Rackspace $RXT -- both of which are working. And I'm hungry for more.

If you're not afraid of earnings after the bell today, next up is Altice $ATUS, a company involved in broadband and related services. Check out this setup:

Being above those highs from 2018 feels incredibly bullish to me.

Here's Steve Strazza in our recent "Freshly Squeezed" Report:

After coming public in 2018 and doing nothing for two years, ATUS just finally broke to all-time highs. It’s now consolidating just above its IPO highs around 35.

And just look at how well ATUS is digging in relative to the rest of the market despite being in the weak Telecom sector. When we see names showing leadership while the rest of their peers show relative weakness, that can only be seen as a positive thing… If/when rotation ever hits their group, they will really be a top-performer.

I'm betting on the rotation finding its way to this sector.

Now with earnings coming up after the bell today, it feels like the market is tipping its hand on an upside breakout. However, its still incredibly important to limit our risk. And there's no shame in waiting until after the market opens tomorrow morning to let any post-earnings jitters shake out before putting the trade on. But with volalility relatively tame in these options ahead of earnings, I'm ready to roll the dice now.

Here's the Play:

I like a $ATUS September 37/45 Bull Call Spread here for around $2.75 or cheaper. This means we'll be long the 37 calls and short the 45 calls for a next debit which represents the most we can lose in this trade.

If we see a close below $35, that's my signal to exit this spread on the next trading day. And due to earnings, that could happen as early as tomorrow. So keep this in mind. I'll be trading this position smaller than usual with my money.

If it goes our way following earnings or at any time from now until September expiration, I'll look to close the position when I can do so for $5.40 or more. This would represent capturing at least 50% of the maximum available profit in this spread -- without having to hold it all the way until September.

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

~ @chicagosean

P.S. We do trades like this regularly. If you'd like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free!

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