I love finding trades where the market is completely mispricing risk — and that’s exactly what I saw in Shopify (SHOP) ahead of its earnings this week.
Historically, this stock moves around 19% on earnings. Yet the option chain was only pricing in a 10% move for the May 10 expiration. That’s a massive disconnect — and an opportunity for anyone paying attention.
I broke down the last 10 earnings reactions, and nearly all of them had a 15% to 20% move.
That’s not random. That’s a pattern.
So I went hunting for cheap premium and found a debit spread that let me risk under a dollar to make two. I bought the $94 call and sold the $96 call expiring May 16 for a 97-cent debit.
That spread pays off big if SHOP pushes past $96 — just a $2 move off where it was trading. Considering the average earnings reaction is closer to $14, I like those odds.
The key here isn’t predicting direction — it’s understanding volatility. And when I see this kind of historical pattern against mispriced options, I’m going to press the gas every time.
This is exactly the kind of setup I’ll be walking through live in today’s 1 p.m. earnings workshop.
We’re going to hunt down edge cases just like this together, so don’t be late!
DraftKings Looks Cheap and Primed for a Bounce
The other stock I’ve got my eye on this week is DraftKings (DKNG). It’s trading near support around $34, and from a fundamental standpoint, this thing looks insanely cheap.
I ran the numbers — price to sales is attractive, fair value is solid, and earnings are coming up Thursday. Now, I’m not in yet, but this is one of those setups I want to be ready for.
If it gives me a shot around that $30 handle, I may take it. I’m not looking to chase — I’m looking to scoop it up where risk is limited and reward is high.
Technically, we’ve seen this stock bounce from these levels before, and if it holds again, there’s room for a solid move. That’s especially true if earnings can spark some momentum.
I’ll be watching the implied move in the options and comparing it to past earnings reactions to see if there’s any pricing edge — same as I did with Shopify.
Right now, I’m not forcing anything. If it comes to me, great. If not, I’ve got plenty of other trades working. But I wanted to flag it because this is the kind of name I want exposure to when the market starts rotating back into high-growth names.
I’ll keep tracking this one and price out the earnings setup in today’s live session.
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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