Options Traders Cash In on Marriott International

Marriott stock regularly rallied into earnings

Jul 6, 2017 at 3:24 PM
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Subscribers to Schaeffer's PowerTrend service recently enjoyed a 135% profit thanks to Marriott International Inc (NASDAQ:MAR) July 87.50 calls. Below, we'll break down what attracted us to MAR stock, and how the options trade played out. 

When we recommended Marriott calls back on April 20, the underlying stock was in an ideal technical situation. Specifically, the shares were trading just above their 10% year-to-date mark, as well as the round $90 level. The 40-day moving average had also been offering support, and pullbacks to this trendline had served as strong buying opportunities in 2017. 

This positive price action was being overlooked by analysts across Wall Street. While seven brokerage firms had "buy" or "strong buy" ratings on the hotel stock, nine others maintained tepid "hold" recommendations. There was clearly a lack of appreciation for the shares' technical strength. 

Plus, our recommendation came within a month of the company's next earnings release. Looking back, we noted how MAR stock had rallied in the weeks leading up to earnings in four of the previous six quarters. On top of all this, it was simply an opportune time to target Marriott International options, based on its Schaeffer's Volatility Index (SVI) of 21%, which was near the bottom of its annual range. 

Marriott began to reward options traders soon after the trade was initiated, as the stock again rallied ahead of earnings. Then, an upbeat quarterly earnings report and forecast sent the shares surging. MAR stock's positive momentum continued, guiding the stock to record highs, and allowing us to close half our position on June 1. When we finally closed our full position on June 29, options traders had more than doubled their money. 

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