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Good afternoon, everybody. JD here with your Rational Trader market analysis daily.
In today’s video, I want to walk through two trades — one on FedEx, one on Micron — both of which used the exact same strategy. You’ve heard me talk about it. I call it the Mean Reversion Cash Machine.
And this week, it worked beautifully.
FedEx (FDX): Textbook Setup
FedEx reported earnings last night. I went into the trade having sold the $255 calls — that strike was so far out-of-the-money it wasn’t even on the daily chart. The stock was stretched two standard deviations above its mean, and when a name is that extended into earnings, I start paying attention.
The earnings report itself? It was mixed. Some good, some not-so-great.
But the important thing is this: the stock fell back toward its mean, right in line with what I was expecting.
It opened this morning around $222, and those $255 calls I sold? You could buy them back for a penny.
That’s the whole idea behind this strategy — find overextended stocks, especially ahead of events that inflate premiums, and let the probabilities do the work.
Micron (MU): Similar Setup, Slightly Different Feel
Micron was another example. I sold the $142 calls, expiring Friday, for around a buck.
This one had me thinking a bit more — Micron has been on a tear. In the past 2–3 months, it’s basically doubled. That’s not nothing.
And with AI demand and NVIDIA exposure, I was careful.
But again, I stuck to the plan. The stock was closing just under two standard deviations above its mean, and earnings were after the bell.
Even with a strong print — and it was strong — the stock traded around $132 in the after-hours session. That’s a 4–5% move, which is exactly in line with implied volatility expectations.
The $142 calls? Probably going to expire worthless. Another win.
Why These Trades Worked
Let’s step back and look at why both setups delivered:
- The stocks were stretched
- The premium was inflated
- The earnings expectations weren’t that wild
- I sold far-out calls that didn’t need to be perfect — they just needed to be unlikely
That’s the point of the Mean Reversion Cash Machine. I’m not trying to call tops. I’m not trying to fade narratives. I’m selling into statistical extremes when the numbers make sense.
Looking Ahead
We’re heading into earnings season — and this week was just the appetizer.
In the next 2–3 weeks, dozens of stocks will set up just like FedEx and Micron did. And I’ll be ready — same process, same discipline, same focus on probability over prediction.
Talk soon,
JD
The Rational Trader
