[Options] Using Earnings as a Catalyst in Motorola

Sean McLaughlin
April 12, 2023

Did you know Motorola has been around since long before the cellular phone?

In the late 90's and early 2000's, Motorola was one of the go-to cell phone manufacturers. I owned several, personally. To this day, I still maintain that I've never had a clearer signal with zero audio delay than I did with my Motorola StarTac phone circa 2001.

This all came up this morning when internally, while discussing the setup in the $MSI stock, we were all kind of surprised that Motorola, based in Chicago, is a one-hundred year old company! Wow.

Clearly, this is a company that has gone through many pivots to lead new technology development.

Of more immediate concern to us options traders is we've got two potential catalysts that can drive some quick gains for us.

First, the chart of $MSI:

We had a very clear breakout above yearly resistance about two weeks ago. Since then, the price action has formed a high a tight flag and with the big round "300" looming just above, we think that level will act as a magnet to pull the stock there.

And if that magnet is not enough, earnings are on deck for May 11th and that might be just the catalyst to push us to and through the level.

The way we're going to play it is with a tactical short-term bet using simple call options.

Here's the Play:

I like buying $MSI May 300 calls for approximately $4.00. This debit we pay today is the most we can lose in the event neither of our catalysts do the work for us.

Because it's a short-term play with binary earnings risk, I will play this slightly smaller than I normally would. And I'll be aggressive in taking my profits. If/when $MSI gets to $305 per share, I'll look to exit my entire position for a profit. How much profit will depend on when that happens. The sooner we get to $305, the more profit we'll earn.

And we're also going to keep our stop level tight. Any close below $280 greatly diminishes my enthusiasm for this short-term bet and I'll look to exit the entire position for whatever I can salvage.

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

ASO subscribers who missed last week’s video Jam Session where we reviewed activity in our options portfolio from the past week can catch it here.

~ @OptionsSean

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! Or give us a call to learn more: 323-421-7991.

 

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