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When a stock gaps lower on earnings, most traders panic — but that can be a huge mistake. Sometimes a gap down is actually a buying opportunity if you have a smart plan in place.
That’s exactly what I’m doing with Intel (INTC) right now.
Intel reported earnings that beat on the top and bottom lines, but the stock still gapped down. Instead of running for the hills, I decided to pick up some shares and put on a collar trade to protect the downside while giving myself some upside exposure.
The Setup: Buying the Dip With a Safety Net
I bought 100 shares of Intel after the gap lower. To manage risk, I sold a covered call at the $24 strike and bought a protective put at the $18 strike. This setup gives me two major advantages: It caps my downside if Intel keeps sliding, but still allows me to make money if the stock rebounds toward $24 or higher.
Right now, I’m simply letting this one ride. Intel could drift down into the $18 range, which is where my protective put kicks in. But if the stock holds the lows and starts working its way back toward $24 to $26, I can start locking in gains. My ideal scenario is a rally back to the 200-day moving average — and given the fundamentals, I think that’s still in play.
Why This Strategy Works on Earnings Gaps
Most of the time, a gap down after good earnings means one thing — the move is emotional, not rational. If Intel had missed expectations, it would be a different story. But because it beat and still sold off, I see this as an opportunity to exploit the fear and add shares at a discount.
The collar strategy also helps me stay disciplined. Instead of trying to guess every tick, I already know my max risk and reward. If Intel climbs back into the mid-$20s, I’ll be sitting on a solid profit — and if it sinks, my losses are capped.
That’s how you survive earnings season without blowing up your account. Have a plan, manage your risk, and look for the opportunities that everyone else is too scared to touch.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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