DailyPlay – Opening Trade (DHR) Partial Closing Trade (SRE) – September 27, 2022

Partial Closing Trade

SRE -76.14% Gain: Sell to Close 1 Contract Oct. 21st $165/$145 Put Vertical @ $7.75 Credit. DailyPlay Portfolio: By Closing 1 of the 5 Contracts, we will be receiving $775.

DHR Bearish Opening Trade

View DHR Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 2 Contracts Oct. 21st $265/$282.5 Call Vertical Spreads @ $6.35 Credit.

Total Risk: This trade has a max risk of $2,230 (2 Contracts x $1,115).

Trend Continuation Signal: This is a Bearish trade on a stock that is experiencing a bearish trend. 

1M/6M Trends: Bearish/ Bearish

Technical Score: 7/10

OptionsPlay Score: 101

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

Here’s a new trade idea based almost completely upon one new key element that is different than the past. When we look at a weekly bar chart of Danaher Corp. (DHR), we see it’s been in a trading range this year, and being in the middle of that range right now gives us no particular reason to trade the name.

DHR – Weekly

But look at the same chart with the Cloud model place on it, and we see that last week the cloud’s Lagging Line broke its cloud bottom, suggesting a new leg lower is likely starting.

DHR – Weekly with Cloud Model

As such, let’s look to sell an October 21st $265/$282.5 call spread. t closed last Friday at $8.45 mid, collecting us about 38% of the strike differential. I suspect this will test and potentially breach its 2022 lowest weekly close of $238.60.