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LYFT earnings preview and Neutral Strategies
3 min read

LYFT earnings preview and Neutral Strategies

Lyft (LYFT) reports earnings after the close (~4:05pm) Options are pricing in about a +/-9.3% (about $3) move by tomorrow's close Prior earnings (in reverse chronological order) saw actual moves of +22%, -12%, -6% and +3%.
LYFT earnings preview and Neutral Strategies

  • Lyft (LYFT) reports earnings after the close (~4:05pm)
  • Options are pricing in about a +/-9.3% (about $3) move by tomorrow's close
  • Prior earnings (in reverse chronological order) saw actual moves of +22%, -12%, -6% and +3%.

The Setup

Here's a 1 month expected move chart with this Friday's move highlighted, via Options AI technology. The 9.3% move expected by Friday is a significant chunk of the 15% or so move expected over the next month:

And here's how LYFT's expected move compares to rival UBER and the QQQ for the next 7 days, UBER reported last week so LYFT is now showing double the expected move of UBER and almost 4 times the QQQ:

Ways to Trade

Neutral Flies and Condors - First, let's look neutral with credit Iron Condors and Flies based on the expected move, isolating the event and using this Friday as an expiration:

Both the Fly and the Iron Condor are neutral strategies and do best if the stock does not move. They differ in that one targets a specific strike for max profit, risking a little to make a lot (the Fly), while the other establishes a range of max profit, between strikes.

Iron Condor - Let's look at the condor first. Its short strikes are the -28p, and the -33.50c. Max profit is realized anywhere between those two strikes on expiration Friday:

The long strikes of +27p and +34.5c defines the risk. If the stock is beyond those on Friday's close it is a max loss.

It's just worse than a 1 to 1 risk/reward ratio (risking .54 to make .46). Notice the breakevens (where red goes to green) are just outside the expected move. That breakeven is the total credit received for the trade beyond the short strikes.

TL:DR - This condor has a max gain if it moves inside the expected move. It has a max loss if it moves far beyond.

Iron Fly - Here's a look at the Fly, with the center strike -30.50p/-30.50c:

The positive of a fly is if the stock doesn't move at all from here into Friday it risks very little to make a lot. The negative is a move to the expected move and it basically makes nothing and just beyond that it is at max loss. This is a much more targeted neutral strategy with a very specific price in mind. It is extremely neutral in this case using the ATM strike as its target.

Previously:

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