A Bullish Play on E*Trade Ahead of Earnings

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Oct. 17 (Bloomberg) –- Zacks.com Senior Strategist Jared Levy discusses his options strategy for E*Trade with Alix Steel on Bloomberg Television's "Market Makers" (Source: Bloomberg)

It is 11:56. i am alix steel.

It is an historic day for stocks.

The s&p 500 hitting a record high.

1726.82. just shy of the record level today.

The dow is not as lucky.

Down by about 50 points as the market digests this debt deal we have seen in washington.

It is time for today's options insight.

Investors have a plethora of information outside of d.c. jared lee the -- jared levy is -- what kind of mood is e trade typically see on earnings day?

It is hit or miss with the trade.

The company has been humming back, rebranding itself.

In terms of the options market, what we are seeing is actually a neutral sort of bias.

There is no excess bullish or bearishness.

They're looking at about a seven percent maximum move in the stock.

There are some traders betting on a catastrophic move or even a big rally.

You look at as 20 or 21 calls and those 15 and 14 points.

Though still have some value.

Even if we see a seven percent move, what is the option trade?

I'm going to go a little bit conservative because of the multiple it just because of the multiple here.

I am looking at november, buying the 15 call, selling the 17 call.

That is my maximum risk there.

I can make about 43% return as long as the stock stays above $17. if i understand the trade correctly, you only have a 15% chance of losing everything.

If the probability is so low, why not appear game?

-- why not up your game?

The market has so many moving parts.

E trade has a lot to gain.

Analysts have been building up their momentum.

I like what i am seeing in 2014 in terms of the bullish side, but there are risks.

The biggest one is their valuation.

If they make $.80 this year, it still puts them at 20, 21 kaiser warnings.

That could be frowned upon by in investors.

They have had an 84% rally this year.

Is it more of a financial or is that more of and internet text.

Which gets hit on those down days?

If you look at their peers, they have been doing pretty good.

What is nice about e trade, it is a pure financial.

You do not have the bank exposure like a goldman or jpmorgan might have.

It tends to side with the financials.

Does that mean that this trait is more fundamental than technical?

I think it is a blend of both.

There is good technical support.

Right around the $16 35 said area, that is where we break even.

There is a fundamental play there.

It is a combination of both.

I like to give myself a little bit of probability in the game.

Thank you.

Bold call, vertical spread for

This text has been automatically generated. It may not be 100% accurate.


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