Forget chasing headlines or analyst upgrades. This is the kind of edge Wall Street never wanted you to see.

Abbott Laboratories — Classic Oversold Setup

Abbott (ABT) reports tomorrow morning, and the setup is about as clean as they come.

The stock’s trading roughly two standard deviations below its mean — which is just a technical way of saying it’s been pushed way further down than usual.

When that happens, the odds favor a move back toward the middle once the news hits.

I’m not trying to predict the earnings number. The cash machine logic is simple: when stocks get stretched, mean reversion does the heavy lifting.

Here’s the trade I’m using:

• Sell the $128 put
• Buy the $123 put

Both expire this Friday, October 17.

That’s a put credit spread, meaning I’m collecting premium up front — about $1 per contract — while limiting my risk by buying the put below. The distance between the strikes is $5, so that’s gives us a pretty good reward-to-risk profile.

If Abbott simply holds steady or even drifts slightly lower without breaking below $128, that spread expires worthless — and we keep the premium.

Progressive (PGR): Same Logic, Smaller Scale

The next setup’s in Progressive (PGR), which also reports tomorrow morning. It’s the same story, different chart.

PGR’s been trading about two standard deviations below its mean, showing the same kind of stretched behavior we saw in Abbott. These are the setups I love — quiet, logical, and repeatable.

For this one:

• Sell the $230 put
• Buy the $225 put

Expiration same as ABT: Friday, October 17.

This spread brings in about 50 cents per contract, and just like Abbott, it’s defined-risk. That 50 cents represents a 10% potential return on the spread width in just a few days — not bad for a name that only needs to stay above a reasonable level.

Why I Like Both

Earnings season inflates option premiums because traders expect volatility. That inflation makes credit spreads attractive — you get paid more to take the other side of emotional trades.

By targeting stocks that are oversold heading into earnings, we’re not betting on miracles. We’re betting on normal — on the idea that most big moves are overreactions.

Defined risk. Repeatable math. Consistent logic.

That’s the entire philosophy of the Mean Reversion Cash Machine.

This is JD — good luck, and I’ll see you tomorrow.

Talk soon,

JD
The Rational Trader

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