Rigetti Computing (RGTI) may not be related to New York Yankees legend Dave Righetti, but its stock has been knocking it out of the park over the last year. 

And if you follow the stock, you know that RGTI is a market darling, but one that may be suffering from a common issue with growth-oriented businesses. It needs to transform from a company with a small revenue and negative earnings to a sustainable growth stock. 

The sub-$5 billion market cap company has drawn a lot of investor attention due to its potential in a hot-as-heck market area, quantum computing. That, and a set of partnerships forged with big tech firms and research institutions led the stock out of the realm of the “pink sheets” and into mid-cap status. 

RGTI Traders Have Made It, But Can They Keep It 

But as they say about the Major Leagues in baseball, as tough as it is to get there, it is even tougher to stay there. And with earnings hitting later on Aug. 12, there is a sense that this is a particularly pivotal quarterly report for Rigetti Computing. That drama has only intensified in recent days, as other up-and-coming growth stocks imploded on earnings releases, 20% or more in some cases.

Because while future growth is the ultimate investor attraction, it can fade quickly, once expectations reach a breaking point. And for RGTI, numbers like those in this box below are not going to create lasting goodwill, unless they keep delivering.

Let’s chart RGTI, then see what type of options protection might allow traders to profit from upcoming good news, while defending against a fall from grace.

Here’s the same chart as above, but run back only 1 year instead of 3, to focus on the company’s stock price performance since it became a symbol of the future of quantum computing. 

There’s nothing that looks imminent in terms of a big move, but earnings often change that. And lately, it is not even a matter of simply beating earnings. It is more about the market’s reaction and the forward-looking view from management. This is the double-edged sword investing in smaller growth companies. 

Charting RGTI: Moment of Truth

However, if I shorten up to a 2-hour chart covering the last 2 months and draw a pair of trend lines, we see that RGTI is acting like a stock approaching quarterly earnings. Its volatility is shrinking, which might set up for a volatile move in either direction. The flat moving averages across 3 different time frames (20, 50, and 150-day periods) confirm that the stock appears to be waiting for something. That “something” is Tuesday night. 

With a volatile name like this, the phrase Barchart uses to describe collars and married puts, “Protection Strategies,” is a relative term. It is hard to imagine a trader looking at RGTI as anything but a high-growth prospect, either over the near term or longer term. So the collar I chose as an example reflects that wider acceptable range of returns.

For more on using Barchart’s outstanding options tools and data, click here: https://www.barchart.com/education/options-tutorials.

That example above shows the stock at Monday’s $15.98 close, and call sale/put purchase at strike prices of $22 and $13, respectively. That produces essentially a “zero-cost” collar, with $6 of upside and $3 of downside per share. That’s a 2:1 tradeoff, all the way out to December, which means that even if RGTI falls on earnings Tuesday, there’s an entire quarter to recover, plus another month or so, before a decision would need to be made. 

Earnings on stocks like this one are a roll of the dice, regardless of the company’s actual reported figures. That’s because market sentiment plays a role. So the issue for RGTI’s stock price in the near term has as much to do with the broader trader attitude toward making money. Which is why the collar, which helps traders avoid losing a lot of money, is a consideration in situations like this.