Zurich-based Chubb Limited (CB) is the world’s largest publicly traded property and casualty insurance company. CB reported earnings this week that topped estimates. But the market wasn’t sure how to react, as analysts offered a mix of target price increases and decreases.  What’s clear, however, is that analysts are overwhelmingly bullish toward CB, as 84% give the stock a buy or better rating. Perhaps this is due to the “conventional” wisdom that insurance companies benefit from rising interest rates.

But analysts would be well advised to check out CB’s chart. Despite the solid earnings numbers, the stock ended the week flat. Moreover, it failed to break out of a four-month downtrend that has seen the stock drop 14%. This slide has been guided by the 20-day moving average (blue line in chart), which hasn’t allowed a daily close above it since early June. Above that lies the 50-day moving average (red line), which has yet to be tested. It sits at the $196 level, just a point above the short strike of our call credit spread. At its current slope, it will fall below this strike in the coming week. Thus, the stock will have to pierce two points of resistance to move into the money.

If you agree that the 20-day moving average will continue guiding CB lower, consider the following trade that relies on the stock staying below $195 (green line) through expiration in seven weeks:

Buy to Open the CB 16Sep 200 call (CB220916C200)
Sell to Open the CB 16Sep 195 call (CB220916C195) for a credit of $1.40 (selling a vertical)

This credit is $0.02 less than the mid-point price of the spread at Friday’s $188.64 close. Unless CB drops quickly, you should be able to get close to that price.

The commission on this trade should be no more than $1.30 per spread. Each spread would then yield $138.70. This trade reduces your buying power by $500, making your net investment $361.30 per spread ($500 – $138.70). If CB closes below $195 on September 16, both options will expire worthless and your return on the spread would be 38% ($138.70/$361.30).  

Target (TGT) reported earnings before the bell on Wednesday that beat estimates on both revenue and profits. The company also expects its fiscal Q4 comparable sales growth to be higher than previous forecasts. Moreover, TGT claimed the supply chain mess has not been an issue – store shelves are full and ready for the holiday buying onslaught.

Analysts were mostly bullish on the report, giving TGT several target price increases (there was one lower price). One went as high as $350, a 38% premium to Friday’s closing price. The stock price was not rewarded, however. The shares dropped 4.7% on Wednesday and slid further the rest of the week. However, this was a common theme among several retailers, including Walmart (WMT). In fact, the overall retail sector was lower for the week.

The pullback dropped the shares to just above their 50-day moving average (blue line in chart). This trade is thus a bet that TGT will regain its footing and stay above the 50-day as holiday sales numbers – that are predicted to be robust – start rolling in. The short 245 strike (red line) of our put credit spread is below the 50-day, relying on trendline support to hold through expiration.

If you agree that TGT will stay atop its 50-day moving average line in chart), consider the following trade that relies on the stock remaining above 245  (through expiration in six weeks.

Buy to Open TGT 31Dec 240 put (TGT211231P240)
Sell to Open TGT 31Dec 245 put (TGT211231P245) for a credit of $1.60 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when TGT was trading around $251. Unless the stock rises quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $158.70. This trade reduces your buying power by $500 and makes your net investment $341.30 ($500 – $158.70) for one spread.  If TGT closes above $245 on December 31, both options will expire worthless and your return on the spread would be 46% ($158.70/$341.30).

Affirm Holdings (AFRM) provides a platform for point-of-sale payments for consumers and merchants. In August, AFRM announced a partnership with Amazon.com (AMZN) to offer flexible payment solutions to customers with AMZN purchases above $50. AFRM reported earnings on Wednesday after the bell that missed on profits but beat on revenue. The company also raised sales guidance.

Wall Street apparently forgave the earnings miss, largely because it was not clear if the discrepancy used comparable numbers. Moreover, AFRM said its AMZN relationship as a buy-now-pay-later service was exclusive. Clearly, analysts were looking at AFRM’s growth prospects, as the company was greeted with several target price upgrades that reached as high as $185 (the stock closed at $149 on Friday).

After a nasty, four-day 21% plunge heading into earnings that pulled the stock to its 50-day moving average, the stock rebounded 13.7% the day after the earnings news. Given the earnings rebound, analyst target upgrades and deal with AMZN, we are going with a bullish trade on AFRM that keys on the stock maintaining its three-month rally and staying atop its 50-day moving average (blue line in chart). The short put strike of our credit spread sits at $133 (red line in chart), just below the 50-day.

If you agree that AFRM will continue its uptrend and stay atop its 50-day moving average line in chart), consider the following trade that relies on the stock remaining above $133  (through expiration in seven weeks.

Buy to Open AFRM 31Dec 128 put (AFRM211231P128)
Sell to Open AFRM 31Dec 133 put (AFRM211231P133) for a credit of $1.85 (selling a vertical)

This credit is $0.05 less than the mid-point of the option spread when AFRM was trading at $149. Unless the stock rises quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $183.70. This trade reduces your buying power by $500 and makes your net investment $316.30 ($500 – $183.70) for one spread.  If AFRM closes above $133 on December 31, both options will expire worthless and your return on the spread would be 58% ($183.70/$316.30).

MetLife (MET) won’t get anyone’s juices flowing. It’s frankly a rather boring insurance and financial services company that’s been around for 158 years. But who cares … if we can make money on a trade, right?

MET reported earnings last week that beat estimates on the top and bottom lines. Hardly anyone noticed. Analysts were silent. There were no stories other than a dry listing of its key performance numbers. And the stock fell 2% the next day. Ho hum.

But MET is up 36% for the year, which is well ahead of the S&P 500’s 25%. After a swoon in June and July, the stock has been grinding steadily higher along the dual support of its 50-day and 200-day moving averages. The key is the 50-day (blue line in chart), which has allowed just three daily closes below it during the past three months. This trendline, which is rising slightly, sits at $61.10, which is above the short strike of our put spread trade. Thus, MET would have to pierce this support to hurt this trade. And the 200-day (red line in chart) sits at $61 to provide another layer of support. The last time MET closed below the 200-day was more than a year ago.

If you agree that MET will continue its slow ascent and stay atop its 50-day moving average line in chart), consider the following trade that relies on the stock remaining above $62.50  (through expiration in six weeks.

Buy to Open MET 17Dec 60 put (MET211217P60)
Sell to Open MET 17Dec 62.5 put (MET211217P62.5) for a credit of $0.75 (selling a vertical)

This credit is $0.04 less than the mid-point of the option spread when MET was trading at $64. Unless the stock rises quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $73.70. This trade reduces your buying power by $250 and makes your net investment $176.30 ($250 – $73.70) for one spread.  If MET closes above $62.50 on December 17, both options will expire worthless and your return on the spread would be 42% ($73.70/$176.30).

Intuitive Surgical (ISRG) – the maker of the da Vinci robotic surgical system – reported earnings on Tuesday that showed a solid increase from a year earlier and beat estimates, though not by much. The company shipped 72% more da Vinci units compared to a year earlier. Also, the company tightened – but did not increase – its 2021 guidance. The report was accompanied by Johnson & Johnson (JNJ) announcing a two-year delay in developing a rival soft-tissue surgical robot.

Though there were no upgrades, analysts apparently approved of the numbers through price target increases. One went as high as $381 (ISRG closed at $341.52 on Friday). The stock reacted well to the report, gaining 2.8% through the end of the week. In the process, the shares moved above the 20-day moving average for the first time in six weeks. The stock has tended to respect the 20-day, using it as support during a three-month, 34% rally and as resistance during the recent three-week decline. Note that the short put of our credit spread is below this trendline.

If you agree that ISRG will stay atop its 20-day moving average (blue line in chart) line in chart), consider the following trade that relies on the stock remaining above $330 (red line in chart)  (through expiration in four weeks.

Buy to Open ISRG 19Nov 325 call (ISRG211119C325)
Sell to Open ISRG 19Nov 330 call (ISRG211119C330) for a credit of $1.55 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when ISRG was trading at $341.52. Unless the stock falls quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $153.70. This trade reduces your buying power by $500 and makes your net investment $346.30 ($500 – $153.70) for one spread.  If ISRG closes above $330 on November 19, both options will expire worthless and your return on the spread would be 44% ($153.70/$346.30).

Amid the giddiness over solid earnings from the big banks, you may have missed the lousy earnings report from insurance giant Progressive (PGR) on Thursday morning. Earnings plunged 90% from a year ago and fell 10% shy of estimates. Revenue came up a billion dollars short of expectations. The company also swung to a loss in September due to payouts for Hurricane Ida. Analysts apparently weren’t paying attention, as there were no upgrades, downgrades or target price changes issued after the news.

The stock didn’t do much after the report, falling less than a percent on Thursday. On Friday, the shares gained that all back – and more – and closed right on their declining 20-day moving average. Despite the rebound, PGR has been trading sideways for three weeks after suffering a 6.2% drop in September that was guided by the 20-day. All relevant moving averages sit at or above the stock price, ready to lend resistance. We are therefore playing a bearish call credit spread with the short call sitting above PGR’s 20-day moving average.

If you agree that PGR will struggle with its 20-day moving average (blue line in chart) line in chart), consider the following trade that relies on the stock remaining below 92.5 (red line in chart)  (through expiration in five weeks.

Buy to Open PGR 19Nov 95 call (PGR211119C95)
Sell to Open PGR 19Nov 92.5 call (PGR211119C92.5) for a credit of $0.80 (selling a vertical)

This credit is $0.05 less than the mid-point of the option spread when PGR was trading at $91.25. Unless the stock falls quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $78.70. This trade reduces your buying power by $250 and makes your net investment $171.30 ($250 – $78.70).  If PGR closes below $92.50 on November 19, both options will expire worthless and your return on the spread would be 46% ($78.70/$171.30).