Weekend Trader Series
August 21, 2022
Open Positions Update
- Please note that Box (BOX) is scheduled to report second-quarter earnings after the close on Wednesday, August 24, and there could be increased volatility in BOX shares immediately following the earnings announcement. If you are uncomfortable with the dollar size of your open position, you can reduce your position size to a level that you feel more comfortable with in the event of a sharp adverse move following the earnings report.
The following is this week's recommendation:
Match (MTCH)Place a limit order to buy the Match (MTCH) October 21, 2022 65-strike put at a limit price within range of the current market asked price when you place your order. At the close on Friday, August 19, this option was offered at $6.90. MTCH closed at $61.87 on Friday, August 19.Do not attempt to enter this position after Monday's close.Please use the following guidelines to manage the position:- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, September 12, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Dating app concern Match (MTCH) has shown up on our list of stocks sitting near a 52-week low that also sport a low implied volatility (IV). While there are only a couple of prior instances of this occurring over the past year, both signals saw negative one-month returns. What's more, the equity is trading back below its post-earnings close following a bear gap earlier in the month, and it sits below July's closing low of $64 as well. Match stock has also been chopping around the $66.12 level -- which corresponds with the -50% year-to-date area -- since mid-July, and is now sitting back below this level in a move that appears to be a resignation to the downside.
A round of bearish analyst notes could put even more pressure on MTCH. The brokerage bunch has been unusually bullish of late, with 15 calling it a "buy" or better, compared to just three "hold" ratings, and not a "sell" in sight.
It's also worth noting that short interest has dropped 40% year-to-date, and despite short covering, the stock has lost over 50% year-to-date, showing that the shares have had trouble rallying amid this tailwind.
For those considering speculating on Match stock's next move, options look like the way to go. The security's Schaeffer's Volatility Index (SVI) of 48% sits in the 27th percentile of its annual range. In other words, options players are pricing in relatively low volatility expectations at the moment. With that said, our recommended October 65 put has a leverage ratio of 4.7 and will double in a 17.7% drop in the underlying equity.
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