DailyPlay – Opening Trade (ARKK) – May 13, 2022

View ARKK Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell 20 Contracts June 10 $39/$37 Put Spread @ $1.02 Credit.

Total Risk: This trade has a max risk of $1,960 (20 contracts x $98 per contract).

Counter Trend Signal: This is a Bullish strategy on an ETF that is experiencing bearish 1M and 6M trends.

1M/6M Trends: Bearish/Bearish

Technical Score: 2/10

OptionsPlay Score: 98

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. 

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Investment Rationale

Here’s an idea for those who are willing to stab for a bottom in what has been one of the most trashed names we hear and read about daily. Of course, picking true falling-knife bottoms isn’t easy, but I’ll share with you that I’ve just purchased this stock myself for the same reason we’re going to look to sell a put spread in it today.

The name is none other than Cathy Woods’ ARKK fund ETF (ARKK). It has finally fallen to a level that I am a willing buyer of it in my own account, with my belief that Cathy’s long-term “innovation stocks” concept is right (but her complete misunderstanding of what investors would do to high multiple names cost her and her investors dearly). Down here, I have a whole different view of the ETF than I did at $100 +.

I have long waited and hoped for the opportunity to be a buyer down here, as it has sold down to both its monthly cloud zone and TDST Line ($39.41). As such, let’s look to sell a June 10 $39/$37 put spread for $1.02 (based upon yesterday’s closing mid-prices). That collects about 43% of the $2 spread differential, and is approx. a 26% return on an annualized basis. Clearly, this is a bet that we’ll see some bounce between now and June 10, about a month from now.

ARKK – Monthly