jay_beckner

I play poker and trade options, seeking edges from study, reflection and analytics.

#008 CME Calls

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Trade Details: Bought to open 5 Oct 22nd CME Group Inc (NASDAQ:CME) 103 calls for $1.55, $782.65 total cost (30.0% of account), 4 days to go. The trade executed at 11:35:42 when the stock was approximately $104.30.

Potential: Unlimited, but targeting $107 for the underlying stock to exit the trade before expiration. Should CME trade below $104, then reevaluation of the position is prudent.

Thesis: Trade in CME shares was strong on Friday as moving averages (9-period and 21-period on the 240-minute chart below) crossed in a bullish manner. Yesterday, those gains were erased on low volume. Today, the 240-minute candlestick chart appears to be forming a morning star bullish reversal pattern.

CME stock holding recent lows and looking to break to higher Fib Retracement levels.

CME stock holding recent lows and looking to break to higher Fib Retracement levels.

This pre-earnings price action has been observed before (see chart below). If history repeats, then a snap higher could occur in the next few days. Supporting the move: the stock's propensity to rally into earnings and positive signals from the frequently mentioned momentum indicators (MACDStochasticsMomentum and RSI). Let's see what happens when volume returns...

CME stock showing a similar MA crossover and reversal pattern last quarter.

CME stock showing a similar MA crossover and reversal pattern last quarter.

I don't follow the stock's fundamentals closely, but I think the company's pricing power and excellent profitability ratings help drive shares higher into earnings with some consistency. I also perceive CME to be relatively insulated from big currency moves and the resulting volatility that's been impacting markets lately.

#008 CME Calls Closed Loss

#007 FIT Calls Day Loss