DailyPlay – Northrop Grumman Corp (NOC) – Feb 22, 2022

View NOC Trade

Strategy Details

Strategy: Call Credit Spread

Strategy Direction: Bearish

Details: Sell to open April 1, 2022 $390/$405 Call Vertical @ $5.10 Credit

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

1M/6M Trends: Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 87

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

Aerospace and Defense sector member Northrop Grumman Corp. (NOC) is on the upper end of its four-month trading zone, and recently filled a prior unfilled gap left from late-January.  With it not having its next earnings report till late-April, there’s no main catalyst for a strong upmove now, and we think it could get dragged lower by continued overall market weakness. We’ve highlighted an unfilled gap in the upper-$350s as a likely target in coming weeks. Moreover, it has only 7% upside to the average analyst’s upside target. From a fundamental perspective, NOC’s sales are taking a turn for the worse with Q4 sales dropping 10% Y/Y

Thus, we will look to sell an April 1 $390/$405 call spread for a $5.10 credit – its closing mid-price spread from Friday. (This has you collecting 34% of the $15 strike differential.)