DailyPlay – American Water Works (AWK) – Feb 16, 2022

Strategy Details

Strategy: Call Debit Spread

Strategy Direction: Bullish

Details: Buy to open Mar 18, 2022 $145/$155 Call Vertical @ $3.95 Debit Limit Order

Counter Trend Signal: This is a bullish strategy on a stock or ETF that is experiencing a bearish trend. 

1M/6M Trends: Bearish/Bearish

Technical Score: 3/10

OptionsPlay Score: 101

View AWK Trade

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade.

Investment Rationale

Today’s Daily Play is what I call a pure “trader’s trade”:  It’s to put on a bullish call spread in a name that reports quarterly earnings after today’s closing bell, wherein the stock has sharply sold off in 2022, but now finds itself on both a daily Aggressive Sequential -13 and Setup -9 counts that is also resting right into its prior swing area.

The idea is to buy the American Water Works (AWK) March 18 $145/$155 call vertical spread for just about $3.95 debit (its Tuesday closing mid-price strike differentials).  Our strategy is to play the likelihood that earnings and/or revenues beat Street estimates, and that the oversold, washed-out stock then rallies.

Our intent is to hold this trade for no more than a week or so, as we’re likely to quickly make or lose money – with the odds better that we make a profit (given the already very beaten down stock).

Rick Bensignor

Chief Market Strategist