Latest news with #MeanReversionTrading
CNBC
2 days ago
- Business
- CNBC
Buying the dip on this footwear stock using options after 'overdone' sell-off
Crocs got hammered — down nearly 30% after the Thursday report — after cautious guidance tied to the macro backdrop overshadowed an earnings beat. Sure, uncertainty is everywhere right now, but such a flush on a name that still topped earnings looks overdone. Analyst views are mixed, yet even the downgrades (Stifel, Barclays, BofA, KeyBanc) carry price targets in the $80–$100 range — still above where CROX is trading. I'm not expecting fireworks here, but the setup I like only needs CROX to trade around $77 —about 50 cents from current levels — to deliver a 100% return on risk. Small move, defined risk, clear payoff. For CNBC readers: I'm opening up my options trade scanner for free —grab a few more trades like this while it's live. I also break down these setups in detail in my book Mean Reversion Trading . To provide confirmation, I am using two technical indicators for this trade setup. MACD (moving average convergence divergence): One reliable way to spot potential reversals is the MACD indicator. The standard settings (12, 26, 9) are widely used but can be a bit laggy, so I often switch to MACD (5, 13, 5) for quicker reads. On CROX, the MACD line (blue) still hasn't crossed above the signal line (yellow). With post-earnings setups — especially after a steep drop — patience pays. Waiting for confirmation (e.g., the bullish crossover or at least a turning histogram) helps avoid getting trapped in the wrong trade if the slide continues. RSI (relative strength index): The RSI is a straightforward momentum gauge and a handy reversal tell. Since it's currently oversold, consider waiting for it to curl higher and reclaim 30 for added confirmation — helps avoid jumping in on a false start. The trade: CROX 76-77 bull call spread To get bullish on CROX, I'm using a bull call spread. With the stock around $76.56, the setup is simple: buy the $76 call (ITM) and sell the $77 call (OTM) as one package — defined risk and defined payoff. If price wiggles, you can scale by layering more spreads. For example, if CROX dips toward $73, add a $73–$74 call spread to take advantage of the pullback while keeping risk tight. Here is my exact trade setup: Buy $76 call, Sept. 12 expiry Sell $77 call, Sept. 12 expiry Cost: $50 Potential Profit: $50 If CROX finishes at or above $77 (the short strike) by expiration, the spread pays its full $1.00 value—turning a roughly $0.50 debit into a 100% return. Running 50 contracts risks $2,500 for a $2,500 max gain. As CROX rebounds, you can ladder in additional spreads to scale exposure methodically and capitalize on these occasional washouts. -Nishant Pant Founder: Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
CNBC
05-08-2025
- Business
- CNBC
Trading a bullish momentum shift in American Express shares with options
Despite delivering a solid earnings beat, American Express (AXP) has slid 9% over the past month. On July 18, the company reported stronger-than-expected EPS and revenue, outperforming analyst estimates across the board. The stock initially began to recover after the report, but got caught up in the broader market sell-off triggered by Friday's disappointing labor data and the downward revisions to May and June jobs numbers. That said, Monday's bounce didn't look like your typical dead cat rally — and many names, including AXP, are showing signs of real strength as the market shakes off that knee-jerk reaction. All of this sets up a potentially attractive trade opportunity in AXP. While I already have a bullish bias based on fundamentals, I'm looking to validate the setup using three key technical indicators. A quick glance at AXP's six-month daily chart reveals several signs that the stock may be ready to reverse course and push higher. RSI (relative strength index) The ever-reliable RSI is one of the simplest tools in a trader's arsenal — offering insight not just into a trend's strength, but also into potential turning points. While the longer-term RSI trend on AXP still points downward, we're now seeing a noticeable uptick. It's not a full reversal signal just yet, but it's enough to put the stock on the radar and look for confirmation from other indicators before pulling the trigger. Directional movement index (DMI) The directional movement index (DMI) is made up of three parts: DI+ (green), DI– (red), and the ADX (blue), which gauges the strength of the trend. When DI– sits above DI+, it typically confirms that bears are in control. But when those lines begin to reverse — with DI+ climbing and DI– tapering off — it often hints that the momentum is starting to shift. That's exactly what's unfolding on the AXP chart right now. DI+ is gradually gaining ground while DI– is losing steam, suggesting that the recent selling pressure may be easing and buyers could be stepping back in. MACD (final confirmation) The MACD (Moving Average Convergence Divergence) is a go-to tool for identifying trend reversals. I'm using a fast MACD for this trade with settings (5, 13, 5). This version of MACD is valuable in finding trade setups. In the chart below, the MACD line (blue) and the signal line (yellow) are inching closer. I've marked previous instances where a bullish crossover — when the blue line moves above the yellow — successfully signaled a shift in trend. As for AXP, that crossover hasn't happened yet, so this setup is still in wait-and-see mode for now. I cover many of these setups in my book "Mean Reversion Trading" and provide further insights and resources on my website The trade setup: AXP 295-300 bull call spread To take a bullish trade on AXP, I'm using a trade structure called a "bull call spread." With AXP trading at $297, I would want to buy a $295 call and sell a $300 call as a single unit. However, since we are waiting for the MACD crossover, that would mean by the time the confirmation comes from MACD, the stock will likely be trading higher. If the stock is trading around $302 when the confirmation, comes I would construct a 300-305 call spread instead. If AXP moves just a few dollars up from here and the stock price is at or above my short strike by expiration, this trade will yield a 100% ROI on capital risked. With 10 contracts, this equates to risking $2,500 to potentially gain $2,500. Here is my exact trade setup: Buy $295 call, Aug. 29 expiry Sell $173005 call, Aug. 29 expiry Cost: $250 Potential Profit: $250 -Nishant Pant Founder: Author: Mean Reversion Trading YouTube, X: @TheMeanTrader DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
CNBC
29-07-2025
- Business
- CNBC
Netflix is experiencing a surprising pullback while S&P 500 hits records. How to trade it
Despite posting strong numbers — with revenue up 16% and full-year guidance raised — Netflix (NFLX) has taken a surprising hit, sliding 8% over the past 11 trading days. When a fundamentally solid stock like this pulls back hard, it tends to raise eyebrows. And for mean reversion traders, that's exactly the kind of set-up that gets us interested. The key question, though, is how do you know when the selling has run its course? Just because a stock drops doesn't make it an automatic buy — the trick is identifying the turning point with some degree of confidence. That's where technical indicators come into play. I outline this entire approach in my book "Mean Reversion Trading," and there are plenty of real-world trade breakdowns on For this particular setup on NFLX, I'm watching two specific indicators: Directional Movement Index (DMI) This indicator consists of three components: the DI+ (green line), the DI– (red line), and the ADX (blue line), which measures trend strength. Typically, a downtrend is in play when DI– is above DI+. But when the two lines begin to shift — with DI+ rising and DI– fading — it can signal that the tide is starting to turn. That's exactly what we're starting to see on the NFLX chart. DI+ is creeping higher while DI– begins to decline — a potential sign that the bearish pressure is fading and bullish momentum is gearing up. MACD (5,13,5) The MACD (Moving Average Convergence Divergence) is a classic tool for spotting trend reversals. While the standard settings (12,26,9) are widely used, they can be slow to react. To speed things up and get earlier signals, I've fine-tuned the inputs to (5,13,5). In this case, the MACD line (blue) hasn't crossed above the signal line (yellow) yet, but it's getting close. Past crossovers at similar price levels have consistently marked the end of short-term corrections — so if the signal fires this week, it could set the stage for a potential reversal trade. The Trade Setup: NFLX 1175-1180 Bull Call Spread For this mean reversion setup on NFLX, I'm using a bull call spread — a straightforward options strategy that caps risk while still offering solid upside. One of the reasons I like this setup is how efficient it is: you can get exposure for around $250 per spread, and scale in easily by adding contracts as the trade unfolds. To put some numbers behind it — running 10 spreads would mean risking $2,500, with the potential to earn $2,500 in profit if NFLX closes at or above $1180 by expiration. This trade is designed around a price range of $1175–$1185, with the idea being to structure the spread just around where the stock is trading. If NFLX pulls back further and dips below $1175, I'd consider adjusting the strikes down — for example, setting up a $1170–$1175 spread — to take advantage of a better entry with potentially higher reward. Here is my exact trade setup: Buy $1175 call, Aug 29th expiry Sell $1180 call, Aug 29th expiry Cost: $250 Potential Profit: $250 -Nishant Pant Founder: Author: "Mean Reversion Trading" Youtube, Twitter: @TheMeanTrader DISCLOSURES: (NFLX bull call spread expiring on Aug. 22) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
CNBC
15-07-2025
- Business
- CNBC
Trading this software stock after a recent sell-off using options
Sometimes the market just flat-out overreacts — and if you've got the right tools and mindset, those overreactions can turn into serious opportunities. That's where mean reversion comes in. It's all about stepping in after the panic, not during it — betting that things will snap back to equilibrium. Now, pair that with a strategic use of options, and you've got a disciplined way to profit from these snapbacks without taking on wild risk. I lay out the full framework for this style of trading in my book Mean Reversion Trading , and there are tons of live trade examples on my site . One name catching my attention right now is Autodesk (ADSK) . The stock dropped a brutal 12% in just four days starting July 8 — all because of speculation it might acquire PTC, a rival in the industry. That news triggered a sharp sell-off — the textbook kind of move we look for as mean reversion traders. Then came the twist: on Monday, Autodesk filed a business update with the Securities and Exchange Commission that all but shut down the idea of a big acquisition. The stock bounced immediately, but the full recovery hasn't happened yet — and that creates an opening for a smart, well-timed entry. Even though this setup stands strong on its own, I still like to check the RSI (relative strength index) for an extra layer of confidence. RSI is a classic momentum gauge. When it dips below 30, the stock is considered oversold — but the real signal comes when it starts climbing back out. In ADSK's case, RSI just popped off that oversold level, giving us a potential green light that momentum is shifting back to the upside. The trade setup: ADSK 295-300 bull call spread I'm approaching this mean reversion setup in ADSK using a bull call spread — a simple yet effective options strategy that limits downside risk while still offering solid return potential. The beauty of this setup is how flexible and capital-efficient it is: you can get positioned for around $250 and easily scale it up by adding contracts as the trade progresses. To put it in perspective — 10 spreads would cost about $2,500, with the potential to double that if ADSK closes at or above $300 by expiration. If the stock dips a bit more and drops below $295, there's a higher risk/reward opportunity by shifting the structure slightly and opening a $290–$295 call spread to take advantage of the lower entry point. Here is my exact trade setup: Buy $295 call, Aug 8 expiry Sell $300 call, Aug 8 expiry Cost: $250 Potential Profit: $250 -Nishant Pant Founder: Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader DISCLOSURES: Nishant has a 295/300 bull call spread on ADSK, expiring on Aug. 8. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
CNBC
01-07-2025
- Business
- CNBC
A low-risk options trade on this IT services stock that recently sold off
Today, I'm diving into a trade setup that's not only low-risk but also a great way to get hands-on experience with options — risking as little as $50 per trade. Okta recently experienced a steep 35% sell-off over just 22 days, despite beating both earnings and revenue estimates. The drop was triggered by a cautious forward outlook, but this kind of sharp move looks like a classic overreaction. That said, just because a stock is oversold doesn't automatically make it a buy — markets can remain stretched in either direction longer than expected. This is where technical analysis becomes critical. By layering in a few key indicators, we can start to assess whether a potential reversal is actually taking shape. For this trade, I'm relying on two technical tools: MACD The Moving Average Convergence Divergence (MACD) is a reliable indicator for spotting trend reversals. I'm using the standard settings (12, 26, 9), which are widely followed. While MACD is technically a lagging indicator — meaning signals often show up after the trend has begun to shift, its crossovers are usually quite dependable. In the chart below, the blue line is the MACD line and the yellow is the signal line. I've highlighted prior instances where a bullish crossover (blue crossing above yellow) accurately marked trend changes. In OKTA's case, this crossover just occurred on 6/27, signaling that momentum may be shifting. RSI The Relative Strength Index (RSI) is another go-to tool for measuring momentum and identifying potential reversals. For the past month, OKTA's RSI has been stuck in a tight range, reflecting a lack of clear direction. But on Friday, RSI broke out of that range, suggesting the end of the consolidation phase and the possibility of a new trend emerging. These kinds of setups are broken down in detail in my book Mean Reversion Trading , which you can check out here . You'll also find hundreds of real-world examples on my site . The trade setup: OKTA 99-100 bull call spread To establish a bullish position on OKTA, I'm using a bull call spread. With the stock trading near $99.60, the setup involves buying the in-the-money (ITM) $99 call and simultaneously selling the $100 out-of-the-money (OTM) call — combining both legs into a defined-risk trade. As the stock moves, this position can be scaled by adding additional spreads. For instance, if OKTA dips to $98, a new $98–$99 spread can be layered on to capitalize on the pullback while keeping risk in check. Here is my exact trade setup: Buy $99 call, Aug 1 expiry Sell $100 call, Aug 1 expiry Cost: $50 Max Profit: $50 Max Loss: $50 If OKTA is trading at or above the short strike ($100) by expiration, this trade has the potential to return 100% on the capital risked. For instance, with 50 contracts, the trade involves risking $2500 to potentially gain $2500. As OKTA rebounds, traders can ladder into the position, gradually increasing exposure to capitalize on a recovery rally. -Nishant Pant Founder: Author: Mean Reversion Trading YouTube, Twitter: @TheMeanTrader DISCLOSURES: Nishant has an OKTA 99-100 call spread expiring on Aug. 1. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
