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Shopify - SHOP Earnings Preview and Options.
3 min read

Shopify - SHOP Earnings Preview and Options.

Shopify - SHOP Earnings Preview and Options.

  • Shopify reports earnings tomorrow before the open. (7am)
  • The stock is at all time highs and short interest is +20%
  • Consensus estimates are a loss of $0.18 on revenue of $443.65
  • Many expect a beat but the stock has moved massively higher into earnings already.

The Set-Up

3 month chart and expected move from OptionsAI technology:

Zooming in, the 2 week expected move, from OptionsAI technology:

This is the type of stock defined risk was made for. The stock has gone from a March low ~$320 to $700 now. Short interest is high. Expectations are high.

Ways to Play

Again, defined risk. For those looking to lean bearish or to fade the move higher based on the fact that any good news would already be priced into the stock, that pesky short interest needs to be kept in mind. It would take a lot of selling to get through that imbalance of buyers below (high short interest means lots of buyers below looking to get bailed out on their short positions). One way to fade the move without spending a ton of money on options premium is to "not be bullish" and position to not be punished by a weak move higher, benefit from any move lower or sideways.

With a bearish price target on OptionsAI technology of ~650 on May 15th we see these options:

The credit call spread is interesting but that's a lot of risk. The Put shows just how expensive it is to play for a move lower and the put spread is about a 2/3 risk/reward ratio for a $50 move lower. The short call spread's strikes can be edited to 25 wide and returns these new metrics, but this is super tight and is basically a coin flip:

For those looking for a squeeze higher, it's wild to see how the options market is pricing a move to $800, it gives it ~20% probability by May 15th:

Some trades generated for that target to compare:

The 700/800 call spread (May 15th) doesn't breakeven until $730 but it does take advantage of really expensive wings to sell (the 800 line) to lower its breakeven versus the 700 call (it's breakeven is about $12 lower than the outright call).

A stock like this makes it extremely difficult to price risk. Comparing various defined risk strategies side by side can help see the forest for the trees , what different potential targets cost, and which is the best fit.

Give OptionsAI technology a try with your own price target and demo trades in AAPL HERE

Actionable Insights from the Options Market

Earnings event expected moves
Unusual activity alerts
Spread trade education

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