[Options] Looking For a Place to Stay

Sean McLaughlin
July 5, 2023

Me and Steve Strazza are currently aboard an airplane to Singapore for the beginning of our 21-day trip throughout Southeast Asia.

We're headed there to meet traders, chartists, and locals to learn how others approach risk.

And one thing that is on my mind is: "Where are we going to stay?"

This feels right as today's trade of the day often answers this question for many travelers.

Here's a chart of short-term rental middle man, Airbnb $ABNB:

And here's what Alfonso had to say about it in the latest Follow the Flow report:

The stock has built a constructive base for the last year. Price is pressing against former support turned resistance, giving us a logical place to define our risk.

If and when buyers absorb all the overhead supply at this resistance zone, we want to be buyers of ABNB.

Although momentum is in a bullish regime, we want to see it reach overbought conditions to support this potential breakout.

If it’s above 130, we want to be long ABNB with a price target near 167 in the coming 2-4 months.

Today, while flying over the Pacific Ocean, I looked at $ABNB and saw that it was indeed above $130. And although earnings are coming up in a few weeks, this chart suggests to me that earnings are exactly what could get this stock moving.

So I'm checking in.

Here's the Play:

I like buying an $ABNB October 135/165 Bull Call Spread for approximately $8.50. That's where the value of the spread closed today. While I don't want to chase this spread, I'm comfortable buying it for up to a $10.00 debit.

The spread has capped upside, but considering the earnings event coming up, why not lower my cost of participation just in case?

If the breakout materializes, I'll be leaving a resting order to sell this spread for a profit at $20.00. This would mean I've more than doubled my invested capital, captured more than 50% of the maximum possible profit, and gotten out without having to hold the spread all the way until October expiration. Nodoby wants to be the last one to clear out of the airbnb (cleanup duty!!)

In the meantime, if $ABNB falls and closes below $125 per share, that's my signal that I'm early or wrong, and that my travel plans are invalid. I'll look to exit the trade near the open of the next trading day.

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

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