DailyPlay – Closing Trade (JNJ) Opening Trade (SPOT) – February 13, 2023

Closing Trade

• JNJ – 102.02% Loss: Buy to Close 3 Contracts (or 100% of your remaining Contracts) March 17th $170/$165 Put Vertical Spreads @ $4.00 Debit per contract. DailyPlay Portfolio: By Closing the remaining 3 of 6 Contracts, we will be paying $1,200. We partially closed this trade on Jan 31 when we Closed 3 Contracts @ $3.54 Debit. Our average cost basis to exit this trade is therefore $3.77 Debit, and our average loss on this trade is 90.41%.

SPOT Bearish Opening Trade

View SPOT Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 7 Contracts Mar 17th $125/$130 Call Vertical Spread @ $2.30 Credit per contract.

Total Risk: This trade has a max risk of $1,890 (7 Contracts x $270).

Counter Trend Signal: This is a bearish trade on a stock that is overbought and expected to retrace lower. 

1M/6M Trends: Bullish/Bullish

Technical Score: 10/10

OptionsPlay Score: 107

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Friday’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. 

Investment Rationale

Last week I called for a stock pullback; dollar rally; and bond decline, and all three played out to start what I think are continued near-term moves in all three. The failure of the SPX at the weekly bullish Propulsion Momentum level (4148) along with the inability for the TNX to close beneath its weekly Base Line at 3.50% two weeks ago – along with the highest SPX bullish sentiment reading in over a year – were the combined catalysts for that call I made.

Looking at our open position portfolio, the only one I want to change right now is the short JNJ March 3rd $170/$165 put spread. We have 3 spreads on, and with them down 102%, let’s take them off, despite the time remaining till expiration. (I try not to have bigger than 100% losses on credit spreads.)

As per a new idea, we recently had a great bullish trade in SPOT. I’m thinking we can now play it in the other direction, looking for a potential 10% downmove from it failing against the August ’22 high that by chance was accompanied by both Aggressive and standard Sequential +13 signals and a very overbought MACD reading.

SPOT – Daily

As such, let’s look to sell some juiced-up calls by shorting the March 17th $125/$130 call spread (it closed at $2.30 mid-price on Friday, representing a 46% premium collection of the $5 strike differential).