(MAR) had mixed earnings results this week, beating on profits but missing on
revenue. Given that the company is at the forefront of COVID-affected stocks,
year-over-year comparisons are meaningless. But the company noted that leisure
travel was picking up, though some bookings are being affected by the Delta
variant spread. MAR also noted that staffing issues persisted. However, these
headwinds are known and are probably baked into MAR’s price.
Street appeared optimistic about the report, giving the stock a few target
price increases (though there were no upgrades). The shares sagged about 1.4%
the day after the report but recovered by the end of the week.
On the charts, the stock has gone nowhere for nearly six months. The bottom of the trading range is around the 135 level (green line in chart), which also is the location of the 200-day moving average (red line in chart). This trendline provided solid support on a pullback in mid-July. Note that this is also the location of the short put of our credit spread. Finally, the 50-day moving average (blue line in chart) has leveled off after a 2-1/2-month decline, a sign that the shares may have found a solid bottom.
you agree that MAR will stay above its 200-day moving average, consider the
following trade that relies on the stock remaining above 135 through expiration
in six weeks.
to Open MAR 17Sep 130 put (MAR210917P130)
Sell to Open MAR 17Sep
135 put (MAR210917P135) for a credit of $1.05 (selling a vertical)
credit is $0.03 less than the mid-point
of the option spread when MAR was trading at $141.59. Unless the stock rallies
quickly from here, you should be able to get close to this amount.
commission on this trade will be only $1.30 per spread. Each spread would then yield $103.70. This
trade reduces your buying power by $500 and makes your net investment $396.30
($500 – $103.70). If MAR closes above
$135 on September 17, both options will expire worthless
and your return on the spread would be 26% ($103.70 / $396.30).