Playing Boeing Into Earnings & A Trade On TD Ameritrade

Oct. 22, 2019 3:40 PM ETThe Boeing Company (BA)AMTD-OLD10 Comments
Philip Davis profile picture
Philip Davis
66.48K Followers

Summary

  • We think most of the bad news is priced in at Boeing.
  • We've constructed an options spread that returns up to 122% in 2 years.
  • Zero margin requirement makes it very exciting.
  • We also present a trade idea on TD Ameritrade.

Can things get worse for Boeing (NYSE:BA)?

Since Thursday's close, BA has dropped $40, from $370 to $330 and that's 10.8% in two sessions so we'll watch the $333 line (10%) to see if they can getg back over that. At that point we'd look for a weak bounce at $340 and a strong one at $348, but the news on BA has been very, very bad with two downgrades yesterday as rumors came out that BA had misled to regulators - leading to hundreds of deaths.

BA booked a $5.6Bn charge in Q2 and estimated the 737 Max grounding would cost them $8Bn overall but that was before the new revelations. BA usually makes $10Bn a year, but lost $3Bn last quarter and they will report again tomorrow - so get ready for some fireworks. It's very unlikely we'll hear that "all is well" tomorrow and it's too risky to play short puts in this environment. However, we can still play for an eventual recovery with a Bull Call Options Spread as the first trade in our new Earnings Portfolio:

  • Buy 5 BA 2022 $300 calls for $72.50 ($36,250)
  • Sell 5 BA 2022 $350 calls for $50 ($25,000)

That's net $11,250 on the $25,000 spread that is currently over $15,000 in the money so, if BA gets back over $350 by Jan, 2022, you will make $13,750 (122%), which is not bad money for 2 years. If BA is flat or goes lower, we can begin to recoup our money by selling short calls, like the Jan $330 calls, which are $20. Just selling 1 contract for those puts $2,000 in our pocket and we have 8 quarters to sell so it's very possible we can generate $16,000 worth of income while waiting for our $13,750 pay-off!

Separately, we decided to make a new $100,000 Earnings Portfolio, mostly for quick trades during the season as we are mainly in cash and have plenty to play with. I suggested the following trade on TD Ameritrade(AMTD):

Let's make an Earnings Portfolio with $100,000 to do some earnings plays while we wait for a good time to start rebuilding the main portfolios. For AMTD, we can:

  • Sell 5 AMTD 2022 $30 puts for $4.20 ($2,100)
  • Buy 10 AMTD Jan $38 calls for $2.30 ($2,300)
  • Sell 5 AMTD 2021 $45 calls for $2.60 ($2,600)

That's a net credit of $1,800 on a $7,000 spread where we are disadvantaged by time but not really as an up move or flat would let us cash out Jan and then pick up a 2022 bullish spread to cover the short 2021 $45 calls and a down move would give us a better entry on a 2022 spread and we could roll and DD on the short puts and sell more calls.

Earnings went well last night and the stock should be up a bit this morning and we'll see how it goes but the suggestion came in too close to the closing bell for us to be able to include it in the portfolio, unfortunately so BA will be our first official trade idea to be included. Still, it will be interesting to see how this one pans out.

This article was written by

Philip Davis profile picture
66.48K Followers
Philstockworld.com is the fastest growing stock and option newsletter on the Web. "High Finance for Real People - Fun and Profits" is our motto and our Basic and Premium Chat Sessions offer readers a chance to speak to Phil live during the trading day as well as authors like Optrader, Sabrient, Income Trader and Trend Trader - who send out Alerts during the market sessions and discuss trade ideas live with Members. We even have a new low-cost "Trend Watcher" Membership that lets readers view our chat sessions without directly participating a great solution for people who want to test-drive the site and profit from our experience! Trend Watchers get to view all of our Chat Archives, weekly Webinars - as well as the amazing PSW Wiki, which gives you Phil's recent opinions and trade ideas as well as technical and fundamental analysis of hundreds of stocks that we follow. Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in BA, AMTD over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Positions as indicated but subject to RAPIDLY change (currently mainly cash and an otherwise bearish mix of long and short positions - see previous posts for other trade ideas). Positions mentioned here have been previously discussed at http://www.Philstockworld.com - a Membership site teaching winning stock, options & futures trading, portfolio management skills and income-producing strategies to investors like you.

Recommended For You

Comments (10)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.