DailyPlay Opening Trade (MET) – April 26, 2022

View MET Trade

MET Bearish Opening Trade Signal

Strategy Details

Strategy: Short Call Vertical Spread

Strategy Direction: Bearish

Details: Sell 12 Contracts June 3 $69/$72 Call Verticals @ $1.28 Credit

Total Risk: This trade has a max risk of $2,064 (12 contracts x $172 per contract). 

Counter Trend Signal: This is a bearish trade on a stock that is experiencing a sideways trend. 

1M/6M Trends: Mildly Bearish/Bullish

Technical Score: 9/10

OptionsPlay Score: 104

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Investment Rationale

Yesterday’s reversal higher has bulls lickin’ their chops that the bottom is in. I say that one day does not make a bottom – despite how oversold the market was or how bearish the individual investor is. It’s a single data point that would need to prove itself out days from now and a couple of weeks from now to be valid.

When I look for a name that looks weak but perhaps not at its logical low, I see that Metlife Inc. (MET) has been in a trading range all year, with last Wednesday’s/Thursday’s peak at the top of the range that was also accompanied by an Aggressive Sequential +13 signal and a new completed Setup +9 count. Though yesterday made a potential “hammer” bottom (depending upon what happens today and tomorrow), the $69.50 to $70.50 zone should be decent resistance as it was where all the lows were the past month.

Let’s look for this to shortly stall on any continued rally, and still make its way down to the bottom of the range (~$62) before we see a better bottom. Therefore, we are going to sell a June 3rd $69/$72 call spread for $1.27 based upon yesterday’s closing mid prices. That credit spread will take in about 42% of the spread differential – in line with many credit spreads we put on. MET does report earnings early next week (on May 4th), and that should be the main catalyst for its price movement after its release (besides any major market movement).