Trade of the Day — A”Ranging” a Call Condor

Today’s Trade of the Day is in Range Resources (RRC). The stock is interesting for several reason. One reason is, RRC was the subject of very bullish trading today — see 10:17 color or in Flow Monitor, RRC and then 1 — and the the bullish trading comes after a six-week 28 percent drop in the shares. Yesterday, the stock fell on disappointing second quarter results and the action hints at possible capitulation in the stock — see first chart below (click to enlarge). Also, it’s interesting to note that bearish trading had surfaced two days ahead of the earnings (see 7/26 color or, in Flow Monitor, RRC and 1 and then +). So, it seems that the “smart money” has a good sense about the next direction for shares of the Fort Worth, TX oil and gas company. At least for now.


Today’s trade is in September calls, which expire in 51 days. We are going to target a range between 40 and 42.5, selling those two strikes for the body of a condor. The 37.5 and 45 calls are bought for the wings. The spread, at a 75 cent net debit, offers a nice wide profit range between $38.25 and $44.25, at the September expiration. Shares are finished up 96 cents to $38.20 and the max profit, of $1.75, is possible if shares settle between 40 and 42.5 at expiration, or 4.7 percent and 11.3 percent above current levels. The debit is at risk if shares falls back below $37.5 or rally above $45 per share. The Think or Swim risk graph is plotted below (click to enlarge). RRC Sep 37.5 – 40 – 42.5 – 45 condor at 75 cents or better.

Category: TradeOday