DailyPlay – Closing Trade (VALE) Partial Closing Trade (LEN) – December 2, 2022

Closing Trade

• VALE – 200% Gain: Sell to Close 5 Contracts Dec. 2nd $13.50/$15.50 Call Verticals @ $1.92 Credit. DailyPlay Portfolio: By Closing the remaining 5 of 10 Contracts, we will be receiving $960. We partially closed this trade on November 30 with 5 Contracts at a $0.64 Credit. Our average gain for this trade is therefore 189.85% and our average cost basis to exit this trade is $2.56 Credit.

Partial Closing Trade

• LEN – 64.67% Gain: Buy to Close 1 Contract Dec. 16th $82.50/$77.50 Put Vertical Spread @ $0.59 Debit. DailyPlay Portfolio: By Closing 1 of 3 Contracts, we will be paying $59. 

Investment Rationale

Yesterday was a pretty non-descript day in the market, right?  But did you know that volume was significantly larger than it was on Wednesday’s massive upmove? That means there was real selling on Thursday vs. a light-volumed runaway upmove the day before. So, which day is more significant? Well, I continually hear that long-onlys are not buying this rally; they’re more so selling into it.

Price has hit the major downtrend line from the all-time high, and that’s been the right place and time to be selling earlier this year. Don’t be afraid to do some again. (It’s not wrong until it is.)

SPY – Daily

Today is the key monthly employment report. Consensus non-farm payrolls is 200K and a 3.7% unemployment number. Will higher payrolls be taken as bullish or bearish? This year, I’d say higher is bearish, but maybe bulls will say that a higher number says the economy is humming and nicely handling the higher rate environment. At the same time, today could be a day that completely unwinds Wednesday’s rally if the numbers come in really hot.

With the VIX down near 20, I can pretty much tell you that despite my wanting to be an option buyer (vs. being a seller), I will virtually never buy a new option position on a Friday (as you automatically lose two days of theta because of the weekend). Today is also a weekly option expiration, so with the jobs numbers coming out, too, it’s more of a day to tweak your portfolio than it is to add to it.

Make sure you are out of our very profitable VALE $13.50/$15.50 call spreads that expires today. Let’s also reduce our position in the short LEN Dec. 16th $82.5/$72.5 put spread. We have three of these spreads on; let’s take off one today with us being up ~65% on it.