Joe Tigay
Palo Alto Networks is one that we’ve decided to take a look at.
And so somewhere in the middle of this show, we always like to give an earnings play.
PANW is a symbol that has earnings on Wednesday after the close.
Joe, what are you seeing here in the charts and and how do you want to play it? I see a :).
I see there’s been a stock that’s been just a tremendous win over the past three years.
It’s a security play, Internet security.
People are going to be need this as much as ever.
You know, we’re not going backwards.
This technology is going to continue it to advance.
And even with the the oncoming AI revolution, we’re just going to need more and more of this security.
So if you go back and look at this chart of the past three years, it’s just textbook exactly what you love to see.
It has a run up period of consolidation, a run up period of consolidation again and again.
Now really I see basically the past six months of consolidation here.
We have this nice head and shoulders bottoming formation.
We kind of poked above it just a little bit last month, dip back down, had a little little carpet shake if you will and then we’re back up into that level.
I think it’s ready.
We’ve had this consolidation.
I think we’re ready ahead of this earnings event to make the next leg higher.
Yeah.
So, Joe, do you have a trade? What are you looking? How are you going to play it heading into Wednesday? Obviously, you’re going to probably put something on before.
The earnings comes out after the close on Wednesday.
Yeah.
So you know when looked at some of the history and what it does overtime, we’re actually pricing in an 8%.
Move into into earnings and of course you know when earnings come around options prices are high, there’s pretty expensive to do it.
So I I looked at a call spread, I wanted to play it to the upside.
I wanted to make it a little bit cheaper to do so.
So I sold an upside call.
I’m actually looking out into January.
Again, I want to take advantage of this year and rally.
I get this, I get the earnings event.
Also you know if the market does well on CPI the stock will do well.
If the market does well in December, the stock will do well too.
So I just want to get into this here ahead of the earnings event, expect it to run up here.
I’m just looking at the two 6290 callspread.
The price of spread is about $10.10 fifty.
So that’ll be $1000 and it could turn into a little over $2000.00.
Soit’s a 2 to 1 payout for me, two to one risk reward.
Really like that risk profile and you know in your trade I was saying you know you’d buy the call now leg into it because options premiums are so high in earnings, the premiums are going to be just gone after the earnings event.
So I want to sell the the 290 call now ahead of the earnings event and you know if we do get a run up, I won’t quite, it won’t quite be worth the full, the full $30.00 right after the event, but it’s something I can trade around after the event.
Yeah.
And you know the the reason why I kind of like this, when you look at the sort of the break even that Joe laid out on this 26290 call spread.
I look at past earnings events and I, I try and dissect what happened before.
And when we look sort of every one out of every three or four quarters, we’ve really seen enormous moves out of Palo Alto And and those moves being you know in excess of literally 15% moves.
And so the average move is about 7%.
So the option prices are pricing in a little bit higher than your typical move.
But if you get that outsourced move or even that 7%, we move up 7%.
In Pennsylvania and W and you’re already above that break even.
So I really like to trade because it’s kind of, you know, looked at what past earnings have done, figure out where the stock can be and you know this could pay off immediately above that break even point if they turn out to be good earnings and if they’re bad, I don’t know, maybe we touch that bottom end of the the 🙂 and it’s upside down.
What is it the clown fish that you know.
Upside down so that the the frown and the smiley could be frowned, right?Noticed that before? Yeah, OK, it’s a pop pop fish.
So.
I got young kids, I’m a pop, pop fish with a pop out face and I spread the jury roofs all over the place.
But the good news is, if it turns out right, it turns into a kiss.
Kiss fish.
So it’ll be OK.
Yeah.
