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Unusual Options Activity: THIS Is How Pros Trade Earnings

I have one unusual options trade to highlight today, and it’s a special one.

Because this trader set it up based on my absolute favorite way to trade earnings season.

Remember last Monday, when I showed you 10 dicey options trades that were nothing more than gambling on earnings?

Guess how many turned a profit…

Only two. Two out of 10.

That’s just a 20% win rate.

These traders risked hundreds of thousands of their real money that essentially went “poof” after earnings came out on 80% of these trades.

Thankfully for you, there’s a much better way to play earnings, and I’ll show you exactly what that is today.

The Better Way to Trade Earnings Season

Look, we all know gambling is exciting. This year saw the highest amount ever wagered on the Super Bowl.

But at the end of the day, it’s called gambling for a reason. There’s a chance you can win big, but more times than not, you’re going to lose.

Same thing with playing earnings.

All it takes is one phenomenal win to cover a dozen or more losses. But that incredible overnight gain doesn’t come around quite as often as you’d like, or think.

We didn’t see any monster gains on the 10 trades we highlighted last week.

Instead, just two quick pops for potential profits, and the rest were duds.

That’s why I trade earnings different than most people…

You see, I track companies after the announcement.

This isn’t where all the fun and exciting overnight profits tend to come from, but historically, it has a much better track record of winning (greater than 60%).

And you do it by simply waiting. Wait and see how good or bad the earnings report is, and how the market reacts.

Taking those two pieces of input in stride is how you can tackle earnings season like a pro.

I’m going to share more about my personal approach later this week. So be sure to tune in Thursday for more details.

For today, I want to leave you with a heavy unusual options trade from last week that was right in my wheelhouse.

This Uranium Trade Uses My Favorite Earnings Strategy

This trader came in the day after a 15% move higher in the stock, and spent $2.5 million playing another move higher in the next few months.

They scooped up 15,000 contracts of the Cameco Corp. (CCJ) June 17, 2022 $28 strike call options for $1.70 apiece.

That means the stock would need to rally another 15% from here in the next few months, in order to deliver any kind of profits for this play.

That would be a new 52-week high for the stock, and it still needs to break out of a downward trend channel. Take a look…

(Click here to view larger image.)

The uranium miner had a stellar 2021, more than doubling in value at one point. And now it’s created this consolidation pattern after the big rally.

Clearly the trader has been paying attention to Cameco’s fundamentals. The company expects higher revenues and profits in 2022 based on its investments in new mines.

That’s what I love about this trade. They are not gambling on earnings. They’ve already heard from the company, saw the price action, and now are looking to simply capitalize on what’s likely to follow.

Something I like to call the Earnings Boost.

That’s where a stock rockets higher on an earnings report, and then uses that initial jump to send it much higher for weeks and sometimes months at a time.

With a June expiration, that’s exactly what they are looking for.

So this trader is playing the odds and taking a calculated bet on a stock to rise…

This is almost identical to one of my top trading approaches that I will dive deeper into on Thursday. Don’t miss it.

Regards,

Chad Shoop, CMT
Editor, Quick Hit Profits

Chart of the Day:
A Long, Hard Look at Uranium

(Click here to view larger image.)

Inspired by our unusual options activity today, I decided to pull up a chart of the Global X Uranium ETF (URA) and…

I’d like to nominate it for the all-time worst market timing award.

URA became available to trade just five months before the Fukushima Nuclear Disaster in March 2011, when the Japanese nuclear plant was impacted by an earthquake and led to a meltdown in three of its reactors.

Uranium and nuclear energy quickly became an outright boogeyman of the global energy picture. Ever since, countries have been falling over themselves to shut down nuclear power plants. Per Statista, 65 nuclear reactors have shut down since 2010.

As a result, URA has fallen as much as 95% from where it traded the week of the Fukushima disaster, bottoming during the 2020 pandemic panic.

But, as we can see looking at the chart and the past year’s action, uranium is coming back in style. It’s up about 220% from the bottom.

This isn’t exactly a “chart” take… But I think nuclear energy will return to the world’s stage in the coming years. It’s just plain unreasonable to think we’re going to shift away from fossil fuels with wind turbines, solar panels, and hydroelectric dams alone. 

With this in mind, you almost have to see this as an opportunity to get into this asset class cheap. Even if you don’t follow the unusual options activity today, the recent sell-off in uranium just provides an even cheaper long-term entry point to what could be a critical component of a greener future.

Regards,

Mike Merson
Managing Editor, True Options Masters

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