What are your options - strategies for ASML Holding earnings What are your options - strategies for ASML Holding earnings What are your options - strategies for ASML Holding earnings

What are your options - strategies for ASML Holding earnings

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Koen Hoorelbeke

Options Strategist

Summary:  In the world of investing, earnings season always brings a flurry of activity and potential opportunities. This coming Wednesday, before the bell, we'll be hearing from ASML Holding N.V., a key player in the semiconductor industry.


What are your options - Strategies for ASML Holding N.V. Earnings


In the world of investing, earnings season always brings a flurry of activity and potential opportunities. This coming Wednesday, before the bell, we'll be hearing from ASML Holding N.V., a key player in the semiconductor industry. With the expected move by this Friday being $35.91, based on an ATM Straddle, there are several interesting trade setups that we can consider. In this article, we'll be exploring three different strategies - one bullish, one neutral, and one bearish - each tailored to different market expectations. These strategies include a Bullish Debit Call Spread, an Iron Condor, and a Bearish Put Debit Spread. Let's dive into the details of these setups and see how they could potentially play out.

Please be aware that our examples below are based on the U.S. version of ASML shares, and they can be adapted to its Dutch counterpart traded on the Amsterdam Euronext Exchange.  

Important note: the strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and take into account their unique financial situation, risk tolerance, and investment objectives before making any decisions. Remember, investing in the stock market carries risk, and it's crucial to make informed decisions.


1. Bullish Strategy: Bullish Debit Call Spread

This strategy involves buying a call option at a certain strike price and selling another call option at a higher strike price. Both options have the same expiration date. This strategy is used when the trader expects the underlying stock to rise moderately within a certain range.
KOHO-2023-07-18-00-ASML-DebitCallSpread
1. Strategy: A Bullish Debit Call Spread is a bullish strategy that involves buying a call option and selling another call option with a higher strike price on the same underlying asset and with the same expiration date. This strategy is used when the trader expects a moderate rise in the price of the underlying asset.

2. Trade Setup: In this case, the trader is buying to open a call option on ASML_US with a strike price of $755 and selling to open a call option with a strike price of $760. Both options expire on August 11, 2023.

3. Premium and Risk: The trader is paying a net premium of $2.30 per share (the difference between the mid prices of the two options), for a total cost of $230  (since each contract represents 100 shares). This is also the maximum risk of the trade. The maximum profit is $270, which is the difference between the strike prices ($5) minus the net premium paid ($2.30), multiplied by 100.

4. Breakeven Point: The breakeven point at expiration is $757.30, which is the lower strike price plus the net premium paid.

5. Probability of Profit (POP): The estimated POP is 57.09%. This is a rough estimate of the chance that the trade will be profitable at expiration. Please note that this is a simplification and actual probability may vary based on factors like changes in implied volatility or the price of the underlying asset. The POP is based on the delta.

6. Implied Volatility (IV) Rank: The IV Rank is 13.82, which is relatively low. This means that options on ASML Holding N.V. are currently cheaper compared to their historical prices.

7. Days to Expiration (DTE): There are 25 days left until the options expire.


2. Neutral Strategy: Iron Condor

An iron condor involves selling a call spread and a put spread on the same underlying asset with the same expiration date. This strategy is used when the trader expects the underlying stock to trade within a certain range until expiration.
KOHO-2023-07-18-01-ASML-IronCondor
If you think that ASML Holding N.V. will stay in the expected move range right after the earnings, consider an iron condor. This strategy involves selling a call spread and a put spread on the same stock with the same expiration date. The goal is for the stock to stay between the strike prices of the sold options.

Here's a possible setup:

- Buy to Open ASML 21-Jul-23 805 Call
- Sell to Open ASML 21-Jul-23 800 Call
- Sell to Open ASML 21-Jul-23 720 Put
- Buy to Open ASML 21-Jul-23 715 Put

Reason

High Implied Volatility (IV) due to numbers out on 19th July before market open

Expectation

Limited movement in ASML shares after releasing the figures and imploding IV

BEPs on expiry

Profit between $718.25 and $801.75

Max Risk

If you get a premium of $1.75 the max risk/loss would be $5 - $1.75 = $3.25 per share. 1 contract = 100 shares. Max Risk/Loss = $3.25 * 100 = $25.

For Who?

Only for clients to adhere to the view that the numbers will not cause a move outside the expected move in the share price of ASML Holding N.V.

Trade set up

Sell the Iron Condor in the last 1 – 4 hours of trading on Tuesday 18th for around $ 1,45 - $1,50 (stagger in case of bigger positions). The more you can receive the more you limit your risk.

Closing

A GTC (Good Till Cancelled) order to close the position at $0,30 (stagger in case of bigger positions)

Emergency

If there is a big move in the underlying outside the bandwidth of the long strikes, monitor closely and close position latest on the 21th of July 2- 4 hours before expiry

Probability of Profit

72.62%
(on expiration, based on delta's of the short positions)

Expected Move

for 21th July ’23, based on ATM straddle: +/- $35.28

IV Rank

13.82


3. Bearish Strategy: Bearish Put Debit Spread
This strategy involves buying a put option at a certain strike price and selling another put option at a lower strike price. Both options have the same expiration date. This strategy is used when the trader expects the underlying stock to fall moderately within a certain range.
KOHO-2023-07-18-02-ASML-DebitPutSpread
- Sell to Open ASML 11-Aug-23 750 Put
- Buy to Open ASML 11-Aug-23 755 Put

This is a Bearish Debit Put Spread on ASML Holding N.V. with an expiration date of August 11, 2023. Here's a breakdown of the trade:

1. Strategy: A Bearish Debit Put Spread is a bearish strategy that involves buying a put option and selling another put option with a lower strike price on the same underlying asset and with the same expiration date. This strategy is used when the trader expects a moderate decline in the price of the underlying asset.

2. Trade Setup: In this case, the trader is buying to open a put option on ASML_US with a strike price of $755 and selling to open a put option with a strike price of $750. Both options expire on August 11, 2023.

3. Premium and Risk: The trader is paying a net premium of $2.35 per share (the difference between the mid prices of the two options), for a total cost of $235 (since each contract represents 100 shares). This is also the maximum risk of the trade. The maximum profit is $265, which is the difference between the strike prices ($5) minus the net premium paid ($2.35), multiplied by 100.

4. Breakeven Point: The breakeven point at expiration is $752.65, which is the higher strike price minus the net premium paid.

5. Probability of Profit (POP): The estimated POP is 51.31%. This is a rough estimate of the chance that the trade will be profitable at expiration, based on the position's delta.

6. Implied Volatility (IV) Rank: The IV Rank is 13.82, which is relatively low. This means that options on JPM are currently cheaper compared to their historical prices.

7. Days to Expiration (DTE): There are 24 days left until the options expire.


KOHO-2023-07-18-03-ASML-OptionsOverview
Options Overview by barchart.com

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