Options Corner: CRWD Upgrade Amid SaaS-acre

0:00time now for options corner or joining us to take a deeper look at the chart for its office. Tom White co-hosted fast some market and senior options contributor. Yet Tom this note doesn't surprise me because there are analysts who have said that this should not have been caught up in the SaaS pocket lips. What trends do you notice on this chart for CrowdStrike? Well, why you said that, you know, the stock it did get upgraded. We got a couple of price target cuts some big ones too. Out of BTIG they cut their price target to $4.99 from $6.40 and then also bear lowered their price to $4.50 from $5.50. So a little battle between the analysts even though we got that that upgrade out of Piper Sandler on this one. But this is the way it's been going in cybersecurity over the last 12 months or so. What effect is AI going to have on them? What kind of growth rates are they going to have? Are we going to start to see a slowdown or pullback in cybersecurity? CapEx spend moving forward. We've got a few of the big names here CrowdStrike, Palo Alto and then Zscaler

1:00after their miserable earnings and miserable outlook last week that stock sold off pretty significantly there. But we've got CrowdStrike here in green that's down over 30% from those all time highs that we saw months ago. Palo Alto is kind of in the same pocket here also. So we've seen that downtrend. If you look at just CrowdStrike so far this year it's nearly in bear market territory down nearly 20% or so. So keep that in mind going into this report. When you look at the trade a type of trade that you could maybe look at for this name going into earnings you got to start looking at implied volatility levels. Now we're seeing everything elevated now with the VIX near the 23 level. But then you've got this event risk with CrowdStrike that reports after the close tomorrow. And here's the one year one day Charter CrowdStrike. Yeah you've seen that sell off. It's been pretty consistent with the sector in general. So I looked at a strategy that takes advantage of that really high implied volatility. You can still take a directional bias here Diane while still

2:05remaining pretty passive on the way that you construct a strategy in here. So I went out to the March 6 weekly options that expire in four days. At the end of the week you're going to capture this earnings event. And I looked at a neutral to bullish short put vertical here taking advantage of that higher high implied volatility and higher probability of success. So out of the money the stocks looks like it's going to open up here about 372 C373. It's actually firmed up a little bit compared to the overall market. Selling the 350 put that's out of the money to the downside. And then against it because we want to stay risked to find by the 340 put. So a short $10 wide neutral to bullish put vertical you're going to collect roughly about a 220 credit and anything over two bucks on this one that'll take your break even down to 347 80 to the downside. That's about six and a half percent below where the stock looks like it's going to open up. You've got a probability that that short 350 strike that you're selling in the strategy is going to be out of the money which is what you want. You want it to remain above

3:06the break even a 347 80 and above that short 350 strike about 70 percent probability that it'll be out of money. So that's what we talk about in these passive type of strategies. I can profit if the stock goes higher. I can profit if the stock consolidates. I can even profit if it goes lower. You just don't want it to fall out of bed and go down more than that one standard deviation level on this one. Passive neutral to bullish short put vertical here in crowd strike. If you think it's going to at least consolidate. All right. Thank you Tom. That's an exemplatory there for crowd strike which has earnings due tomorrow.