Watch me make bank or lose bank type post 🤡
I'm targeting spreads on Affirm (AFRM) centered around the $52 strike for options expiring on May 9. My thesis is based on a few key factors:
Pre-Earnings Run-Up: AFRM has seen a notable run-up ahead of earnings, which often signals a "buy the rumor" dynamic. Historically, the stock tends to pull back slightly after earnings—regardless of the results—which supports a cautious short-term outlook.
Earnings Expectations: While I do expect Affirm to report solid earnings, the recent rally appears to have already priced in a lot of optimism. This sets the stage for a potential “sell the news” reaction.
Strike Selection and Price Target: I'm placing spreads around the $52 level, which I estimate to be a reasonable pullback zone post-earnings. It represents a balance between the current elevated price and historical reaction patterns.
Option Pricing and Volatility: The implied volatility (rather than delta—though both are relevant) is extremely high going into earnings, inflating premiums. This benefits the spread structure I’m using. The options for the May 9 expiry are priced so attractively that, even if the stock moves ±10%, the spread could still return a profit due to favorable pricing and volatility crush post-earnings.
The risk to reward here feels just right for me 🤞
