Stock pullbacks can be an opportunity to make your money back and then some. Here’s how
When a stock you own is pulled back, you can use options trading to get your money back.
Case in point: Fluor Corp.
Following its Q1 2026 earnings release, the stock pulled back 15%.
Despite a healthy recovery in net earnings to $160 million compared to the loss in the previous period and the same quarter in the previous year. The market is reacting to the loss of revenue ($3.66 billion, $3.89 billion consensus) and the narrowing of the full-year EBITDA forecast as cost growth in the mining segment accelerates towards the lower end of previous guidance.
But the “data center” thesis remains intact. CEO Jim Breuer highlighted the increase in new awards for gas-fired and nuclear power, the backbone of AI infrastructure. For a shareholder looking to recover from this morning’s $2.50 cut, the 1×2 Call Rate Spread offers a way to repair the position with high efficiency.
Recovery Play: 1×2 Call Ratio against 50 Jun/52.5 Long stock
The 1×2 Call Rate Spread involves buying one low-strike call and selling two high-strike calls. Using the June monthly expiration date:
- Buy (1) June $50 Search
- Sale (2) June $52.50 Searches
- Maximum Earnings: $2.50
- Maximum Loss: No premium expense, but your stock may be written off
- Skill Level: Medium
Net Credit: Ideally executed for a small credit (e.g. $0.10 – $0.25) depending on post-earnings volatility levels.
Why This Works in FLR:
- Basis Reduction via Loan: By taking out a loan, you slightly reduce the effective cost basis of existing shares without requiring additional capital expenditure.
- “Sweet Spot” Acceleration: If FLR returns to pre-earnings levels, this trade reaches its maximum profit of $52.50. Between $50 and $52.50, the long call will gain value quickly, while the two short calls will break or stay out of the money, accelerating your recovery.
- Monetizing Post-Earnings IV: Even after the “IV Crush”, the residual volatility risk premium (VRP) is generally higher on OTM (out-of-the-money) strikes. Selling two calls allows you to capture more of this overvalued premium than a standard vertical spread.
Risk Management and Outlook
The primary risk of the 1×2 spread is the “naked” short call. If the data center narrative goes parabolic and FLR exceeds $55.00 (the spread’s approximate breakeven point), you will effectively limit your gains or face the obligation to sell additional shares.
However, for a stock that cuts guidance, a vertical month beat is less likely than a slow “comeback” as the market digests the $25.7 billion backlog. This play bets on a steady recovery to the $52.50 level, taking back the pre-earnings price while using the market’s own volatility to pay for the “insurance” of the bounce.
