Zillow Group, Inc. (Z) is an online real estate services business that seeks to connect consumers with professionals online. The company’s stock is currently trading around $96.90 in a 52 week range of $81.07-$164.90. The stock has been relatively weak this year with shares falling around 6.8% year to date. Z is set to report earnings after the bell today and the stock is looking weak ahead of the release. Z stock is lower on the session by around 1.8% ahead of the report.

The stock is likely under pressure due to Zillow’s dismal historical performance record on earnings day. Over the past 12 quarters Z has sold off on earnings day 8 times with an average move of 8.08%. The stock has also sold of 8 times in 12 quarters from earnings day to options expiration. Z also looks very weak on a chart. The stock is trading well below the Ichimoku Cloud on the daily bar, and both major moving averages are well below the cloud. With a bearish historical performance record and a weak technical setup it is difficult to justify anything but a short in Z.

The options market is currently implying a move of around $7.00 in Z by this Friday’s close giving us a downside target around $89.90.

Potential Bearish Earnings Trade: Buying the Z May 94-90-86 Put Fly for $0.65
Risk: $65 per 1 lot
Reward: $335 per 1 lot
Breakeven: $93.35 and $86.65

This trade offers a better than 5-1 reward to risk setup and profits near its maximum at the measured move target.

Waste Management, Inc. (WM) closed today’s session at $49.43 trading higher by only $0.10 on the day. The stock has been trading in a 52 week range of $43.24-$55.93 and has underperforming this year with shares falling buy over 3.7% year to date. The stock closed little changed today but there was a very interesting options trade that hit the tape early on in the session.

Early this morning, roughly 40 minutes after the open, a trader bought 4,217 WM May 50 calls for $0.20. By the end of the day over 15,000 contracts traded on this line driving options volume to 10 times the average daily volume in WM. As soon as these options hit the tape shares of WM began rallying trading as high as $49.90 on the day. These calls ripped higher with the stock doubling in value within minutes and trading as high as $0.45 on the session. A trader who bought these calls would have seen them double in value in about 2 minutes time. This is a great example of how unusual options activity in front month options can be traded for quick profits.

Trade: A trader bought 4,217 WM May 50 calls for $0.20
Risk: $20 per 1 lot
Reward: Unlimited
Breakeven: $50.20

If a trader bought a 20 lot of these calls they would have profited $500 at the highs on only $400 in risk. An absolute blowout winner.

AOL Inc. (AOL) is a media and technology company with a worldwide audience. The company’s stock is currently trading around $43.80 in a 52 week range of $33.20-$49.86. The stock is ripping higher today with shares rallying by more than 11% on the session. AOL is rallying on the release of the company’s most recent quarterly earnings where AOL beat consensus estimates on both top and bottom lines.

Analysts were expecting earnings of $0.32 per share on revenues of $594.6 million. Earnings came at $0.34 per share on revenues of $625.1 million. Ahead of the release market makers were implying a move of $3.50 my today’s close, implying an upside target in AOL of $43.20. I used this target to set up an options trade in AOL.

My Trade: I bought the AOL May 8th Weekly 42.5-43.5 Call Spreads for $0.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Breakeven: $42.75

This trade offered a 3-1 reward to risk ratio and with stock at current levels is working out very well. I sold half of my position for a double this morning and if stock remains at these levels I will net the maximum value of $1.00 for this spread at the close, quadrupling my money overnight. This is a great example of how using the measured move target to set up options spreads ahead of earnings is the best way to calculate targets. This spread expires today so no matter what happens I will be out of the trade after today.

Ryland Group Inc (RYL) is a homebuilder with operations in the United States. RYL stock is currently trading around $41.67 in a 52 week range of $30.33-$49.66. The stock has been performing relatively well this year with shares rallying just over 7.8% year to date. The stock is seeing a nice move higher today as shares rally by nearly 3% on the session. On this move higher we are seeing some very bullish unusual options activity indicating that traders believe this move will continue.

Earlier this morning a trader bought 4,331 RYL Jun 42 Calls for $1.40. RYL has traded over 7.1 times its average daily options volume today and nearly 8,000 contracts have now traded on that line. This block of calls in RYL also represents a more than $600,000 bet on further upside in RYL. After these calls hit the tape RYL saw a pop higher and these calls moved higher with the stock. These calls have already traded as high as $1.64 on the day making this a very profitable trade.

Trade: A trader bought 4,331 RYL Jun 42 Calls for $1.40
Risk: $140 per 1 lot
Reward: Unlimited
Breakeven: $43.40

If a trader bought a 20 lot of these calls they would have profited $480 at the highs in a matter of minutes.

Tesla Motors, Inc. (TSLA) is a manufacturer of electric vehicles and electric vehicle components. The company’s stock is currently trading around $230.70 in a 52 week range of $117.22-$291.42. The stock has been relatively flat this year with shares rallying only 3.7% year to date. TSLA is set to report their most recent quarterly earnings today after the bell.

TSLA has rallied on earnings day 7 of the past 12 quarters with an average earnings day move of 8.71%. The stock has only managed to rally from earnings day to options expiration 6 of the past 12 quarters with an average move of 10.12%. Market makers are currently implying a move of $17.40 by this week’s expiration, pricing in a 7.5% move by this Friday’s close. This implied move can be used to calculate an upside target of $248.10 by Friday.

With TSLA shares trading above the cloud and a slight bullish bias in its historical performance record let’s look at how a trader can get long TSLA without risking the capital required to trade the stock. Let’s look at 3 different options strategies.

Trade: Buying the TSLA May 8th Weekly 240-250 Call Spreads for $2.80
Risk: $280 per 1 lot
Reward: $720 per 1 lot
Breakeven: $242.80

This trade offers a reward to risk ratio of better than 2.5-1 and sees maximum profits above $250 on expiration.

Trade: Buying the TSLA May 8th Weekly 240-250-260 Call Fly for $1.45
Risk: $145 per 1 lot
Reward: $855 per 1 lot
Breakeven: $241.45 and $258.55

This trade offers a better reward to risk ratio than the long call spread but will not profit if the stock rallies too much and trades above the upside breakeven point.

Trade: Selling the TSLA May 8th Weekly 230-220 Put Spreads for $4.00
Risk: $600 per 1 lot
Reward: $400 per 1 lot
Breakeven: $226.00

This trade has the worst reward to risk ration but will profit if TSLA rallies, stays flat, or even sells off some.
These 3 options trades all offer better reward to risk setups that trading the underlying stock and allow a trader to take a view on TSLA ahead of earnings in a low risk high reward setup.

International Paper Company (IP) is a paper and packaging manufacturer with operations around the world. The company’s stock is currently trading around $51.70 and is down nearly 3.8% on the session. The stock has been relatively flat this year with shares down by roughly 3.8% year to date. IP has been trading in a 52 week range of $44.50-$57.90. IP is sharply lower today but there was some very interesting options activity earlier in the session that telegraphed the move perfectly.

Earlier this morning a trader bought 1,029 IP May 8th Weekly 52 puts for $0.16 less than 10 minutes after the open. This is a rather large bet for weekly options and nearly 1,900 contracts have now traded on that line. Over 2x the average daily options volume has traded in IP today and the stock saw a big move lower after these puts were bought. Stock was trading at $53.49 when these puts were bought and sold off to session lows of $50.90 after they hit. These puts exploded in value as the stock continued to sell off and traded as high as $3.03 on the session meaning they increased in value by nearly 20x. This trade is a perfect example of an absolute blowout winner in unusual options activity.

Trade: A trader bought 1,029 IP May 8th Weekly 52 puts for $0.16.
Risk: $16 per 1 lot
Breakeven: $51.84

These puts traded as high as $3.03 on the session making this an extremely profitable trade. If a trader would have bought a 20 lot of these puts they would have profited $5,740 at the highs.

Noble Energy, Inc. (NBL) is an oil and gas exploration and production company with operations around the world. The company’s stock is currently trading around $50.70 in a 52 week range of $41.01-$79.63. The stock has rallied nearly 7% this year and is now trading in relatively bullish territory on the Ichimoku Cloud. NBL is set to report earnings before the open tomorrow and a flurry of bullish unusual options activity ahead of the report may be signaling a move higher in the stock.

Earlier in the session a trader bought 1,995 NBL Jun 52.5 Calls for $1.40 and another 1,528 NBL May 50 calls for $1.50. NBL has now traded nearly 15x its average daily options volume NBL is rallying on the day and it seems like options traders are looking for a move higher on earnings.

NBL has rallied 4 times and sold off 4 times on earnings day over the past 8 quarters. On average the stock moves around 2.1% on earnings day. With the options market currently implying a move of $2.30 by expiration we can calculate an upside target of around $53.00 by May expiration. With the relatively bullish chart and bullish orderflow into earnings it seems like NBL is setting up well to the long side.

Trade: Selling the NBL May 52.5-50 put Spreads for $1.45
Risk: $105 per 1 lot
Reward: $145 per 1 lot
Breakeven: $51.05

LinkedIn Corporation (LNKD) is a professional networking site with 300 million members I countries around the world. The stock is currently trading around $252.85 in a 52 week range of $136.02-$276.18. The stock has been doing relatively well this year with shares rallying over 10% year to date. LNKD is set to report their most recent quarterly earnings today after the bell and it appears that the stock may be setting up well for a long into the report.

LNKD has rallied on earnings day 4 of the past 8 quarters and has rallied more than 10% on earnings day for the past 3 quarters. On average the stock moves around 10.3% on earnings. This time around market makers are implying a move of around $21.00 by tomorrow close which would give us an implied upside target of $273.85. LNKD is technically trading inside the cloud showing neutral price action. Despite the relatively sideways chart the stock has shown strong historical performance on earnings. Using the upside measured move target I want to set up a trade in LNKD.

Potential Trade: Buying the LNKD May 1st Weekly 262.5-272.5-282.5 Call Butterfly for $1.00
Risk: $100 per 1 lot
Reward: $900 per 1 lot
Breakeven: $263.50 and $281.50

This trade sets up with a 9-1 reward to risk ration and profits in a very wide range.

Gilead Sciences, Inc. (GILD) is a biopharmaceutical company with operations in North America, Europe, and Asia. The company’s stock is currently trading around $102.00 in a 52 week range of $74.00-$116.83. GILD is has been relatively strong this year with shares rallying more than 8% year to date. GILD is set to report earnings after the bell tomorrow and appears to be setting up well for a long position.

GILD has a relatively strong record on earnings. Over the past 12 quarters the stock has rallied 7 times on earnings day and has rallied from earnings day to the nearest expiration 8 times. On average, shares of GILD move 3.8% on earnings day. This time around market makers are pricing in a move of $4.75 or 4.7% by this Friday’s close. Using this implied move I can calculate an upside target of $106.75 for GILD.

GILD looks relatively strong on a chart as well. The stock is trading well above the Ichimoku Cloud and the future cloud is sloping higher. With a positive technical setup and strong historical performance I will look to get long GILD ahead of the release.

Trade: Buying the GILD May 1st Weekly 106-107 Call Spreads for $0.30
Risk: $30 per 1 lot
Reward: $70 per 1 lot
Breakeven: $106.30

Twitter, Inc. (TWTR) is currently trading around $51.00 in a 52 week range of $29.51-$55.99. The stock has been doing extremely well this year with shares rallying more than 42% year to date. Despite this strong performance shares of TWTR are looking weak ahead of the release of their most recent quarterly earnings after the bell today. TWTR shares are trading lower by over 1.1% today as investors position themselves for the report.

The weakness in TWTR makes sense as the stock typically sells of on earnings day. Over the past 5 quarters the stock has only managed to rally 2 times on earnings day and has traded lower to the nearest options expiration 3 of 5 times. On average shares of TWTR move around 16.3% on earnings day but this time around market makers are implying a move of around $5.50 b this Friday’s close, pricing in a 10.1% move into TWTR options. TWTR looks strong on a chart but with the bearish historical performance record TWTR has and the move lower on earnings day Facebook shares saw I think it is difficult to justify anything other than a short position in TWTR.

Using the implied move I can calculate a downside target of $45.50 by Friday’s close and look to set up an options trade.

Trade: Buying the TWTR Weekly 47-45 Put Spreads for $0.50
Risk: $50 per 1 lot
Reward: $150 per 1 lot
Breakeven: $46.50

This trade offers a 3-1 reward to risk set up should TWTR close below $45 on Friday’s close.