DailyPlay – Conditional Opening Trade (WBA) Closing Trade (LEN) – December 15, 2022

Closing Trade

• LEN – 91.02% Gain: Buy to Close 1 Contract Dec. 16th $82.50/$77.50 Put Vertical Spreads @ $0.15 Debit. DailyPlay Portfolio: By Closing the remaining 1 Contract, we will be paying $15. We took partial profit on this trade on December 2 when we Closed 1 Contract @ $0.59 Debit, and then again on December 12 when we Closed 1 Contract @ $0.62 Debit. Our average gain on this trade is 72.85% and our average cost basis to exit this trade is $0.45 Debit. 

WBA Bearish Opening Trade

View WBA Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 26 Contracts Dec. 30th $41.50/$42.50 Calll Vertical Spreads @ $0.27 Credit.

Total Risk: This trade has a max risk of $1,898 (26 Contracts x $73).

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

1M/6M Trends: Neutral /Bullish

Technical Score: 6/10

OptionsPlay Score: 97

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 that this is a CONDITIONAL trade. We will only enter the trade when the condition is met, which is IF we see a MOVE UP TO $41.45. Also note that the cost basis, premium paid, as well as the number of contracts when we open this trade will therefore be different from what we post today. This condition is only valid for a week unless advised otherwise.

Investment Rationale

The Fed’s 50 bp. rate hike was expected; Chair Powell’s comments were not unexpected (i.e., “rates stay higher for longer”; “won’t stop until the job gets done”); and yet, the SPX sold off from near a 35-pt. gain and turned into a day with a 24-pt. loss. My view on why the turnaround?  Because bulls heard nothing particularly positive from Powell, and this rally has largely been based upon hearing just that tone.

We now have gotten the key economic data that we’re going to get between now and year’s end.  And yet, we find the market is very close to where it was going into Tuesday’s CPI release, meaning that neither bull nor bear has any more decided edge than they did two 48 hours ago. Which to me, makes it less clear as to what the market will do between now and New Years. But what I will say is that my bearish stance does not get shaken until and if it’s proven wrong. With the SPX resistance area I’ve highlighted several times still capping the rally – and the spike high on Tuesday failing right by the daily bullish Propulsion Momentum level (4148) – I still have a decent sense of where I want to see the SPX hold beneath.

Lennar reported after the bell yesterday, and last I looked the stock was down about $2 near $88.50, and well-above the $82.50 short strike we have on in a Dec. 16th $82.5/$77.5 put spread.  his expires tomorrow, so let’s exit today the last spread we have on. It’s been a good trade for us.

But we also need look at a bad one we have, too. We are long a TSLA Dec. 30th $190/$225 call spread. We’re down 93% on it, and I’m hoping that in the next few days it sees some type of bounce from a new daily -13 signal yesterday to help reduce the loss. This one never went our way. (It happens.)  It’s another good reason why we keep our trades to a max. 2% on any single trade.

TSLA – Daily

After spending over two hours tonight looking for a new trade I can live with, I see one potentially lining up in Walgreens Boots (WBA). The below chart shows a Volume at Price indicator for the past month of trading, with the highlighted yellow zone representing where the first standard deviation (~68%) of the volume was traded. Given the range over the last two days, I would think that in the next few trading days (let’s say by Tuesday’s close next week), it is not a stretch to think that the top of that yellow zone (currently $41.45) may very well trade again. If it does, I’ll then want to short a Dec. 30th $41.50/$42.50 call spread (my assumption being that this will not make a new December high before Dec. 30th expiration). Based upon where the current ATM/$1 OTM call spread is trading, if you can then collect the same ~50% of the strike differential that one can get now – a fair but not necessarily an advantageous price for the spread – we’d look to do that as a short-term trade into year’s end.

THIS IS A CONDITIONAL TRADE NEEDING A MOVE UP TO ~$41.45 TO ENTER THE SHORT CALL SPREAD.

WBA – Daily