Top 7 Stocks to Watch in May 2023

Market Update: S&P500 up 6.5% year to date

Here we are again at $4150.00 in the S&P 500, for the fourth time in less than nine months. Right now, we seem to be quietly grinding higher, waiting for the big reason to drop again. It appears that buyers are not going to remain patient for much longer. They are starting to sense weakness in the downside pressure at this level and confidence to push beyond $4200 is building.

$4250 seems to be the next band of resistance above current price action. If, however, we do see a move back to the downside, look for price action to target the $4050 level.

Below is a list of seven stocks to watch in May. The stocks in this list currently have relatively high IVR (Implied Volatility Rank) based on the tastytrade platform calculation, an earnings release date soon, as well as tight and liquid markets in May and June option contracts.

Top Stocks to Watch in May 2023

1. Sofi Technologies Inc. (SOFI) - 5/1 - Before the Open
2. CVS Health Corp (CVS) - 5/3 - Before the Open
3. Royal Caribbean Cruises Ltd. (RCL) - 5/4
4. Trade Desk Inc. (TTD) - 5/9
5. Roblox Corp. (RBLX) - 5/10 - Before the Open
6. Target Corp. (TGT) - 5/17 - Before the Open
7. Walmart Inc. (WMT) - 5/18 - Before the Open

1) Sofi Technologies Inc. (SOFI)

When does Sofi announce earnings? Earnings date: May 1st, 2023 (Before the open)

SoFi Technologies Inc. provides a consumer-focused financial technology platform. SoFi Technologies Inc. is based in Palo Aalto, California. SOFI is currently trading at $5.87, up 26.13 percent from its opening price of 2023. SOFI has reported negative net income for the last five quarters, but it does appear to be developing a positive net income trend.

SOFI presents us with an interesting earnings opportunity because of its relatively high IV and its low price. This is a trade that I would set up in May as a defined-risk directional play. If you wanted to be long SOFI going into earnings you could sell the $6.50 and buy the $5.00 puts in May, and you’d have a slightly better than 50/50 shot through earnings.

The inverse is true if you want to be bearish, you could sell the $5.00 and buy the $6.50 calls in May and have similar odds to the downside. This would be a binary event-risk trade. The options market in May is tight and liquid.

2) CVS Corp (CVS)

When does CVS Corp announce earnings? Earnings Date: May 3rd, 2023 (Before the open)

CVS Health Corporation is a pharmacy innovation company. CVS is currently trading at $73.40, down 20.13% from its opening price of 2023. CVS has reported negative net income once in the last five quarters.

CVS currently has an IVR of 42.3 based on the tastytrade platform calculation. The options market in May is tight and liquid. The opportunity for several short premium trades going into earnings is possible.

In May, short strangles will work if you’re comfortable with the premium to buying power ratio required. Five-dollar wide iron condors will also work will if you want to be delta-neutral through earnings. Short put and call spreads are also an option if you’d like to have a directional assumption through earnings.

3) Royal Caribbean Cruises Ltd. (RCL)

When does Royal Caribbean Cruises announce earnings? Earnings Date: May 4th, 2023

Royal Caribbean Cruises owns and operates three global brands: Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. RCL is currently trading at $61.88, up 22.44% from its opening price of 2023. RCL has reported positive net income once in the last five quarters but does appear to be on a positive net income trend in that period of time.

RCL currently has an IVR of 15.4 based on the tastytrade platform calculation, which is not relatively high for RCL, but volatility is high regardless in May and June contracts. The markets in May and June are five-cents wide and liquid.

In May, twenty-delta short strangles have a decent premium to buying power ratio. Twenty-five-delta, five-dollar wide iron condors will also set up nicely. Short call and puts spreads can also be set up for more directional plays going into earnings.

4) Trade Desk Inc. (TTD)

When does Trade Desk announce earnings? Earnings Date: May 9th, 2023

The Trade Desk, Inc. is a provider of a self-service, cloud-based platform, where ad buyers create, manage and optimize data-driven digital advertising campaigns. It operates primarily in the United States, Europe and Asia. The Trade Desk, Inc. is headquartered in Ventura, California.

TTD is currently trading at $61.56, up 33.86 percent from its opening price of 2023. TTD has reported positive net income in three of the last five quarters. TTD currently has an IVR of 13.2 based on the tastytrade platform calculation. The volatility in May and June contracts is high. The option markets in May and June are tight and liquid.

Twenty-delta short-strangles have a high probability of profit if you’re willing to put up the buying power and accept the premium to buying power ratio required. Five-dollar wide, twenty-delta iron condors will also set up well in May.

5) Roblox Corp. (RBLX)

When does Roblox announce earnings? Earnings Date: May 10th, 2023 (Before the open)

Roblox Corporation develops and operates an online entertainment platform including Roblox Client, an application that allows users to explore 3D digital worlds, Roblox Studio, a toolset which allows developers and creators to build, publish and operate 3D experiences and other content. Roblox Corporation is based in San Mateo, California.

RBLX has reported negative net income for the last five quarters and the trend appears to be getting more negative. RBLX is currently trading at $38.69, up 33.83% from its opening price of 2023. RBLX currently has an IVR of 16.4 based on the tastytrade platform calculation, which is decently high, but volatility in May and June contracts is high regardless.

The options market in May is tight and liquid, many short premium plays will set up well. Short-strangles, short put and call spreads, Iron-condors, will all set up well going into earnings in May.

6) Target Corp. (TGT)

When does Target announce earnings? Earnings Date: May 17th, 2023 (Before the open)

Target Corp. has evolved from just being a pure brick-&-mortar. Target provides an array of owned and premium branded goods ranging from household essentials and electronics to toys and apparel for men, women and kids. It also houses food and pet supplies, home furnishings and decor, home improvement, automotive products, and seasonal merchandise.

TGT is currently trading at $163.50, up 9.02% from its opening price of 2023. TGT has reported positive net income for the last five quarters. TGT currently has an IVR of 42.6, based on the tastytrade platform calculation. The options market in May and June options is liquid and tight. Markets are about ten-cents wide.

If you have the capital to hold naked options positions through earnings in TGT, a couple opportunities exist. A short-put opportunity exists if you’re able and willing to ride out a move against you. A short-strangle opportunity exists if you like the premium to buying power ratio.

Five-dollar wide, twenty-delta iron condors will also set up well in May. High probability trades can be setup up for almost any assumptions going into earnings this May.

7) Walmart Inc. (WMT)

When does Walmart announce earnings? Earnings Date: May 18th, 2023 (Before the open)

Walmart Inc. provides both retail stores and eCommerce. It has 3 reportable segments: Walmart U.S., Walmart International and Sam's Club. It maintains principal offices in Bentonville, Arkansas. WMT has reported positive net income in four of its five last earnings reports. WMT is currently trading at $152.81, up 7.2 percent from its opening price of 2023.

WMT currently has an IVR of 14.7 based on the tastytrade platform calculation, and the volatility in May and June contracts is average at best. That being said, WMT does provide tight markets in May and June options.

The risk reward of the five-dollar wide, twenty-five-delta iron condors set up well in May. Directional at the money short-put and call spreads will also set up fairly well for the binary earnings event in May. The premium to buying power ratio for naked options positions in May and June will not make sense for most traders.