DailyPlay – Opening Trade (VRTX) – July 14, 2022

Bearish Opening Trade Signal

View VRTX Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 2 Contracts Aug 19, 2022 $290/$310 Call Verticals @ $7.60 Credit.

Total Risk: This trade has a max risk of $2,480 (2 Contracts x $1,240 per contract).

Counter Trend Signal: This is a Bearish trade on a stock that is experiencing a bullish trend.

1M/6M Trends: Bullish/Bullish

Technical Score: 10/10

OptionsPlay Score: 103

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. 

Please note these prices are based on the previous day’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. This will be reflected in the Portfolio tab within the OptionsPlay platform.

Investment Rationale

It’s not too easy finding stocks close to all-time highs these days, but when I find one that is testing those highs, and is accompanied by a weekly Combo +13 and a Setup +8, to me it’s likely worth fading – especially given my belief that stocks will likely come off further this year.

So, let’s look at the weekly chart of Vertex Pharmaceuticals (VRTX). Given the above DeMark counts and the stock very much in close proximity to its all-time high, I’d like to short an August 19th $290/$310 call spread. This gives us time to collect some theta while it plays in this area, as well as time to trade off as the summer progresses.

Based upon last night’s closing mid-price, we’d be collecting $7.60, or about 43% of the strike differential.

VRTX – Weekly