Despite all the noise surrounding tariffs and the budget bill this year, seasonality has held up very well. In fact, seasonality has become my favorite backdrop to use when looking for price action to trade on.
That’s why my favorite trade setup for this coming week is a long trade on Ross Stores (NASDAQ:ROST), extending well into January 2026.
Here are the details.
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ROST’s current relative resistance zone sits right around $160, but trading could be choppy for the next few weeks. ROST’s support sits near $120.
Given this, the best trade strategy is a “long call butterfly.” That’s the combination of a long call spread and a short call spread that share the same short strike and the same expiration date. Though the position is often defined as “delta neutral,” this trade certainly delivers profit if price action rises as expected.
The legs of the trade are:
- Buy to open 1 ROST 16 Jan26 135 calls
- Sell to open 2 ROST 16 Jan26 150 calls
- Buy to open 1 ROST 16 Jan26 165 calls
Set an alert for $150 so that you are very aware of the motion into the trade’s middle strike as this is where the maximum profit will be into expiration. You will also notice that price action for the butterfly is more sensitive to fluctuation the closer we are to expiration.
This long call butterfly holds a current debit of $3.28 at this writing, which represents the total risk incurred in the trade. The breakeven price of the stock at expiration on this trade is $138.23 plus commissions.
The total highest potential profit is $15 (the distance between the $135 and $150 strikes) less the cost of the debit incurred by buying the call butterfly, so $20 – $3.28 = $1,672 less commissions. That represents a potential profit of $1,672 on the risk of $328.
Now, it is extremely rare to collect all this premium in this kind of butterfly. Consider price action information to drive your risk and profit parameters; consider profit targets near resistance prices and 100-200% returns, as a suggestion.
This strategy provides several ways to exit, but I will discuss the main two:
- Sell the call butterfly when the profit goal moves into your target parameters – particularly once the middle strike is tested near the expiration time. I often look for 100% to 300% return for these types of call butterflies.
- Sell the call butterfly when your loss threshold is breached. Customarily, this is 50% for me.
More advanced traders might consider rolling the short strikes down over time if price continues upward.
Editorial content from our expert contributors is intended to be information for the general public and not individualized investment advice. Editors/contributors are presenting their individual opinions and strategies, which are neither expressly nor impliedly approved or endorsed by Benzinga.
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