DailyPlay – Opening Trade (VALE) Closing Trade (USO) – August 11, 2022

Closing Trades

USO -40.00% Gain: Buy to Close 1 Contract Aug 12, 2022 $73/$83 Call Verticals @ $1.83 Debit. DailyPlay Portfolio: By closing the remaining 1 of 3 Contracts, we will be paying $183. We took partial profits for this trade on August 5 and then again on August 9. Therefore, the average gain on this trade is roughly 42% and the average cost basis to exit this trade is $1.76 Debit.

Bullish Opening Trade Signal

View VALE Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 70 Contracts Sept 2, 2022 $13.50/$14.50 Call Verticals @ $0.27 Debit.

Total Risk: This trade has a max risk of $1,890 (70 Contracts x $27 per contract).

Counter Trend Signal: This is a Bullish trade on a stock that is experiencing a mildly bullish to bearish trend. 

1M/6M Trends: Mildly Bullish/Bearish

Technical Score: 3/10

OptionsPlay Score: 171

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

Stocks zoomed higher again on Wednesday, fueled by what investors took as a softened inflation outlook. The SPX crossed above 4200, and is getting closer to the area (4270+) where I will likely start to fade the rally. We’re starting to see a real shift higher in bullish sentiment, and the more I hear people say, “You can’t be short”, the more I will look to find the places that we can be. Fading moves takes patience, so I haven’t been in a hurry to do that. In fact, I’ve consistently said that there was more upside likely coming – and it has. Thus, things are looking like they are playing out the way I was anticipating they would. We’ll see if today’s PPI report leads to more buying.

Turning towards our short USO $73/$83 that expires tomorrow, yesterday’s oil inventory report was a well higher stockpile build than expected, and oil should have had a decent selloff. However, it got dragged higher by “Risk-On” buyers, and the corresponding USO ETF closed at $74.32. Make sure you close out the last contract we still have on sometime today.

USO – Daily

I’m also looking to get into a long VALE Sept. 2^nd $13.5/$14.5 call spread. If we’re going to see a final squeeze on the shorts in beaten-down names (this is a copper-related one), then this should also see an upward thrust that takes out the naysayers. This spread costs $0.27 (so 27% of the spread differential), and is already in-the-money by 26 cents, so I look at it as a relatively cheap option to play for that upside over the next three-plus weeks.

VALE – Daily