dani face dani quote

A trio trade in Peloton

A lot of the time, I’ll have traders ask me about the “hype tickers”. What I mean by “hype tickers” is those stocks that are highly talked about in the market for whatever reason — like SPCE or TSLA.

I get it, as an options trader, if you can time these out correctly… they can give you some massive moves. We saw it in SPCE in January after all, and several times over in TLSA.

What’s a “hype ticker” you can think of right now? Well we’re all stuck inside, working on ourselves, and trying to find an outlet… in comes Peloton (PTON). So that’s who I’m going to focus on in this letter…

And I’m going to show you THREE different ways to trade this one ticker…

There’s so much hype around PTON. So naturally, you can get some really explosive moves. But what kind of trades can be made from this “hype”? High short interest (a favorite of mine). So when you’re looking at high short interest, you want to look at something that’s near the previous highs because that’s where it can explode.

Now let’s dive into this trio of trades.

Just so you know, two were taken in our Options Live Trading Room, and one was taken in my Stacked Profits Mastery. And it worked out really well for several members:

“@Danielle Thank you and also for PTON.” – RC

“@Danielle – You’re incredible!!” – John

“PTON shorts losing the race.” – CK

We had a blast trading it, so if you’re looking to get in on the next high short interest trade, consider either joining up in the Options Membership, the Stacked Profits Mastery Program, or grab a copy of my “Short Interest Secrets” Course.

Back to the trade breakdowns…

The first one?

A solid run into earnings — as a swing trade. You know how much I love the run into earnings. So it’s no surprise at least one of these trades would be one. Keep in mind, a run into earnings trade typically means overnight. However, this particular trade covered a week and a half (to almost two weeks). I got in around April 24th for $2.67, and then I held, held, held through almost two weeks. Then I exited for $6.30. Profit wise: that’s a little bit more than a double, like 250%. It’s also a great example of buying a long call. 

In fact, I bought 2 long calls for this trade, and I closed them out for $6.30 each. This is good for someone who is working a steady job/has other stuff to do and can’t devote all their time to watching the charts. That’s one of the main goals of my Mastery, after all.

The second one?

In the chart above, you can see that percentage wise this one is less. Why’s that? Simply because the timeframe was less on this trade, and this one was overnight.

Typically the day before earnings, companies rally pretty hard. (This was technically considered the day before the report still because the report came out after the close.) It backed up overnight and rallied overnight directly before the report — making it a quick 24 hour trade. I got in for $2.57 and got out for $4.20 the next day.

On the flipside from the first trade, this trade is good for someone trading actively, who can watch a momentum move (like this one, which I taught in my “Short Interest Secrets” Course).

Those right there are two ways to trade a move prior to a report… with the help from some favorite indicators of mine that’re perfect for moves like these: the TurboVZO and TrendStrength Turbo Candles. With these indicators, you can really see the momentum coming through on the chart. Additionally, I used data from S3 for short interest data to back up the setup.

So when you’re trading earnings you can trade:

  1. The run into earnings
  2. The actual report
  3. After earnings

In this ‘trio of trades’, I traded the run into earnings two ways and the actual report (which I’ll show you in a second). I chose not to trade after earnings because I was focused on other tickers at the time — you definitely shouldn’t feel pressured to trade all aspects of earnings. Always trade what fits into your trading profile. 

Now for the third, and final of the trio.

As I said earlier, this is an actual earnings trade — a bullish earnings trade. I sold a put credit spread for $1 credit directly before the market close (like 10 minutes before). This means, the earnings report was coming out not even 20 minutes after that.

Why did I do that?

The implied volatility (IV) was incredibly high, that’s why I wanted to sell premium prior to the report. Keep in mind, I did consider buying long calls prior to the report, but you have to consider if it’s really going to move otherwise you won’t make money. So I went with selling a put credit spread. As I said, I sold it for $1, then the next day I closed it out for 18 cents.

That’s an 85% winner overnight — while you sleep. All because I sold the put credit spread then it gapped up overnight giving me an overnight profit.

Now why did I even bother to trade PTON in the first place?

I mainly traded it because it’s a hyped up momentum move. When you’re trading a ticker that can move substantially, in options, you can make a lot of money when it has a bullish pattern with high short interest — like PTON.

Now how can you look to trade a move like this?

Well focus on entry and exit points first and foremost…

My entry point on my run into earnings for my Mastery was a conservative entry on a pullback, then the exit was right before the report. (Pro Tio: it will almost always be before the report.) My second run into earnings trade that happened in the Options Room was much more aggressive because the prices extend off of the moving averages. The TrendStrength Turbo Candles ultimately told me it was a solid entry point. As for the exit? It was the same as before — I got out before the report. Now for my actual earnings trade (the third one), my entry point was right before the report… and you ALWAYS get out right after the report on a trade like this because overnight the IV gets crushed.

How to look for one next time?

Well based on my analysis, when a ticker is talked about a lot and has bullish momentum, it typically travels higher going into the report — creating a high short interest trade for us.

Let me know if you can spot any potential new tickers for earnings trades!

Up Next...

Why We Trade, Maternity Leave & More…

Maternity Leave Musings & More… It’s a little more than 3 weeks after the birth of my second child, and I’m already finding it challenging to ‘enjoy’ the lack of work. While of course, I want to spend that precious time with my newborn son, and I am, I also feel a bit naked without … Read more

Read More

Identifying Higher Highs/Lower Lows (And a Potential Bearish Setup on SPX)

In this video, Allison Ostrander, Director of Risk Tolerance, reviews one of her favorite trading indicators that has allowed for great intraday setups. She also shares a potential bearish setup to consider using the indicator.    The Divergent Bar is an indicator that can help identify a higher high or lower low within the next … Read more

Read More

It’s A Trap: What to Look for When Trading By the 100 SMA

This week Allison Ostrander, Director of Risk Tolerance, shares a bearish trend pattern that sets up potential traps for bulls when price is trading near the 100 simple moving average (SMA). Allison graduated with a Bachelor of Fine Arts degree in Theatre and learned to trade to avoid being a starving artist while pursuing theatre. She now … Read more

Read More

Subscribe Today!

Want to walk the path to trading success together? Join Danielle’s “Five Star Trader” E-Letter for market insights, tips, tricks, and special bonuses.

Sign Up Now
all-as-seen-on-logos