Options Corner: ONON Off Highs Ahead of Earnings

pressure we've seen in the broader athleisure and, of course, athletic shoe space. But now time for options corner. And joining us now to take a deeper look is Rick Ducat, our lead market technician here for Schwab Network. And so underperforming thankfully it's not alone in some of this weakness, but it doesn't exactly help. You know, when you were initially one of these really high growth names right out of the gate. It's been a different year. Of course, for on here. Things can wax and wane. The shoes on the other foot now I guess here. But we can pun intended. Exactly down 17% here. But when we look at kind of how it stacks up against the other names in this athletic apparel area, it's been kind of a tough road for everyone here because the tariff concerns. This is a very sensitive area to all kinds of tariff changes here. And it's just a difficult competitive industry as well. People's fashion senses change. You know things get more and less popular over time. It's a difficult one. So anyway, when we look more specifically at our chart here, we can see that the recent trajectory has been kind of sideways. We had our earnings event here. We had a notable low point that lined up pretty closely to our old 52 week lows right there. So what that means is that now we have a double bottom type supportive area near about the 32 level to consider another double bottom much closer to our current price activity at this green line here 3467 a relative low here 3620. We also had a repeated ceiling here near 39 as well as here just below 40. So some notable horizontal levels really stand out for you to watch in your trading. The price pattern kind of a triangular shape here. So a very modestly sloping trend line going down across the lows. A steeper shorter term uptrend that accompanies it as well. When we think about our moving averages in this case here they are clustered together. Our three fastest ones five day 21. Day 63. Day one month one excuse me, one week, one month and one quarter. They're all coming together right around 37, 50 or so. So when you have these moving averages that are quite close together, typically it speaks to one of two things, either sideways trajectory and of limited volatility or of extreme volatility of prices jumping back and forth so quickly. And so with so much strength that the moving averages don't really find a clear direction. In this case, it's much more obviously the range bound scenario, the sideways grind that we're seeing heading into earnings. So this gives us a very convenient confluence point to watch out for for either a supportive area, because it also lines up with our trend line. You can see here this area that we identified earlier. Or if you had more of a bearish outlook, it could be a potential breakdown point that which once price slips through, it would trigger the cascade of orders and result in a big push to the downside here. Meanwhile, 251 day EMA comes in near 4090, our orange longest term moving average here. RSI trending upward. Just a hair above that 50 mid line here to give us a very slightly more bullish read on this situation here as we head into earnings. So now we can also see when we consider our volume profile study we have some pretty distinct nodes. That's what this blue histogram on the right side of the screen represents. The volume of the trading activity at various price levels. The volume study tells you when trading happened. Volume profile shows you where it happened here. So we also have our thick red line here. Our point of control 36 heaviest trading area of all. If we were to dip below 35 things thin out very notably here we also have this gulf between about 3850 to about 41 or so. Then if we do push beyond that kind of void in our trading activity, there's two more nodes, one here near about 4250 and one here near about 45 or so. So those are the areas that stand out from this perspective. Yeah, I think really great to break down here of what to watch for the technicals. And now of course, as we assess how to approach this name as we go into its earnings next week, I mean, we have been in kind of a period of consolidation. I know that we are still off of highs by I mean it's like over 28% at this point, but we've at least found a new range. So considering, of course, its recent price and also sort of Of the range it's been stuck in. How do you think through, of course, trading this name, for example purposes, right? So to think first August 21st hour 14 days until expiration monthly expiration here plus or minus about 12% here. That's our yellow box right here. That shows probably would would be lining up around those old highs that we saw near 42 as well as roughly around those old lows. But we're going to excuse me a little bit above those lows. That's what our September 18th expiration would be around those lows. Excuse me. So September is what we're going to target though in this case that's our green box here plus or minus about 30 or 15.2% here. Because we had this kind of range bound area as well. We're going to be making a bullish trade kind of targeting a push above that level. So our trade in question is pretty simple today. An example trade plus 1st September 1837 50 call single and a 275 debit here. So 42 days out max loss is our debit paid 275 for just this loan call option. As is the case with all long calls, max profit is potentially unlimited. Our break even here 4025 about 7.3% to the upside. Meanwhile, are expected to move more than 15% or so. So well within that range here. And, you know, you could make this into a vertical spread. You could say, well, I would look at the edge of that expected move range. I could add a short call here to defray some of the costs. But when you have these low volatility situations, it can often be the precursor to a high volatility breakout situation here in which you might want to take advantage of having an uncapped potential gain. So in this case, also due to the option being relatively inexpensive to me, it seemed appropriate to just go with the single long call and try to just make a play on that, rather than including a spread. You could also perhaps include a calendar type option here where you have a short call and a shorter duration here. In this case, I just kept it simple. I like keeping it simple. I think sometimes that's almost like the winning recipe and of course risk definition here. I think it's important as you go into an earnings event, especially in retail, because we've seen some big moves from retail over the last several quarters and on has been no exception. Unfortunately for them, a bit more to the downside, but appreciate it. Rick Duquette for bringing, of course, all