DailyPlay – Conditional Opening Trade (MRNA) Closing Trade (GNRC) – December 20, 2022

Closing trade

• GNRC – 102.50% Loss:  Buy to Close 6 Contracts Dec 23rd $100/$95 Put Vertical Spreads @ $4.05 Debit. DailyPlay Portfolio: By Closing all 6 Contracts, we will be paying $2.430. 

MRNA Conditional Bullish Opening Trade

View MRNA Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 6 Contracts Jan 20th $180/$175 Put Vertical Spreads @ $1.77 Credit.

Total Risk: This trade has a max risk of $1,938 (6 Contracts x $323).

Trend Continuation Signal: This is a Bullish trade on a stock that is experiencing a bullish trend.

1M/6M Trends: Bullish/Bullish

Technical Score: 10/10

OptionsPlay Score: 94

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 it pullback to the $181 to $176 range. 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

Stocks remained under pressure as prior bulls keep getting forced out of their longs, with year-end tax loss selling adding further fuel, and time running out for Santa Claus rally-thinking bulls that it’s actually going to happen. The SPX made a low of 3800 on Monday, filling the bottom of the 40+ pt. gap at 3818, while also holding above its daily bearish Propulsion Momentum level of 3814. This area is where the market needs to hold for bulls to have any sense that even a small trading bounce can occur before year-end. Yesterday’s new low for this current decline brought the daily bullish Propulsion Momentum level down to 3952, which unrelatedly is right near the daily Conversion and Base Lines’ values. (All three are currently in the highlighted cyan-colored ellipse. That’s your closest resistance area right now.

SPX – Daily

Let’s do some house-cleaning of non-performing trades that I’ve recently recommended:

1. Let’s exit the GNRC Dec. 23rd short $100/$95 put spread that expires on Friday. We’re down just over 100% and that’s basically the max loss I’m willing to take on an option position.
2. If TSLA closes above $156.80 today, it will confirm the -13 downside exhaustion signal and give us a better chance to shortly exit with a lesser loss than the 91% we’re down now. Our long $190/$225 call spread expires on the 30th, so we need see this lift quickly in price to be able to possibly cut the loss by a third or half.  If we were to see anything near $175+ in coming days, I’d take that “as good as it’ll get” and just exit.
3. On Dec. 12th we exited half our long UNG $16.50/$18 call spread, up ~70% on that half. Price has come back down to the hedge strike (i.e., $18), so today let’s take off another 5 of the remaining 10 contracts we have on.
4. The four conditional trades in ( WBA, SPY, TSLA and NFLX ) are still open trade ideas to initiate bearish trades on if we see rallies up to my preferred entry zones.

With my having four pending bearish ideas to potentially get into, I’m going to give you a bullish one to buy on a pullback. Moderna (MRNA) has recently rallied to its best level since January ’22, finally breaking out above an 8-month trading range. If we see it pullback to the $181 to $176 range (I’d probably enter the spread when/if I saw price hit right near both of those prices, meaning I’d do half at each of those levels), we’ll look to sell the Jan. 20th $180/$175 put spread at the then bid/offer mid-price. Right now, the Jan. 20th ATM/ $5 OTM is going for about $2.40, meaning you’re collecting 48% of the $5 strike differential. I’d think that it should be somewhat similar if we get down to our entry zone highlighted in the green box in the below chart.

MRNA – Daily