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Condors into the Cloud earnings- BOX, ADSK, CRM, WDA, OKTA.
3 min read

Condors into the Cloud earnings- BOX, ADSK, CRM, WDA, OKTA.

Condors into the Cloud earnings- BOX, ADSK, CRM, WDA, OKTA.

Overview

If there's an earnings theme for this week it may be the cloud. On Wednesday we hear reports from Autodesk (ADSK), Workday (WDAY), and Box (BOX) and Thursday we hear from Salesforce (CRM), and Okta (OKTA).

The Set-Up

Cloud stocks are outperforming almost every other sector since the coronavirus lows, here's the Bessemer Emerging Cloud Index versus the major indices:

Ways To Play

This is one of those situations where there's not a ton of mystery left in the rally. These stocks have generally benefitted from a work from home environment. But everyone knows that and there's not a ton of new information that could come out on earnings that only capture a bit of the shutdown. In cases like that you could look for a sector ETF to possibly fade the move, either "not bullish" or simply neutral. It's unlikely all would move in the same direction and it's possible individual stocks can cancel eachother out. Unfortuantely in this case, the sector ETFs don't have a ton of option volume. So let's just look at one stock from each day, starting with WDAY's earnings tomorrow. Here's the two week expected move from OptionsAI technology:

The expected move for the next few weeks is a reasonable one. For those looking to fade the move entirely and sell to both the bulls and the bears here's how a neutral trade for June expiration looks on OptionsAI technology:

Let's focus on the Iron Condor because that's a really nice risk reward with a lot of room between the short strikes. It makes max gain if the stock is between 155 and 185 on June 19th. Here's how it looks on the chart:

As you can see the breakevens are just outside the expected move not only for earnings but also over the next few weeks. Any move inside the earnings expected move should mean a decent implied vol collapse.

Now let's look at CRM, which reports Thursday. Here's a similar neutral price target expiring in June:

Similar 3/2 risk/reward on the iron condor. Here it is on the chart:

Again, breakevens outside the expected move for both the event and the weeks that follow.

Or course any neutral trade like an iron condor can be moved higher or lower to express a slightly bullish or bearish centering but that makes the probability of profit a little less once you start leaning directionally. For those directionally inclined, say bearish, but more so just not bullish, a credit call spread is an interesting play. From OptionsAI technology:

In this case the breakeven (the green to red) is slightly below recent highs and is pretty tight at $182 in the stock. So in this case the "not bullish" is actually a little bit more bearish as even a move inside the bullish consensus would be enough to make this trade a losing one. But still, one to consider for those looking to fade the rally.

See a part of OptionsAI technology with your own price target and demo trades in AAPL HERE

Previously:

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