DailyPlay – Opening Trade (COIN) – February 16, 2023

COIN Bullish Opening Trade Signal

View COIN Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 2 Contracts Mar 10th $70/$54 Put Vertical Spreads @ $6.78 Credit per contract.

Total Risk: This trade has a max risk of $1,846 (2 Contracts x $923).

Trend Continuation Signal: This stock is currently bullish and found support to continue this uptrend.

1M/6M Trends:  Bullish/Bullish

Technical Score: 5/10

OptionsPlay Score: 92

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 Wednesday’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

Stocks pulled off a victory on Wednesday after being down early, to mark a new closing high in the SPX for the current rally started in October. The SPX closed at 4148 – the precise level I am keying on come this Friday’s close. A close above there that gets upside follow-through next week is bullish; a failure to get above 4148 on Friday’s close keeps me playing with a defensive approach, as it will be very similar to the failure at last August’s high (which also stopped against its bullish weekly Propulsion Momentum level (highlighted in yellow-colored rectangles).

SPX – Weekly

Looking at a new idea for today, notice that until earlier this month, both price and the daily cloud’s Lagging Line (in bold blue) had been beneath the daily cloud since late 2021. Then, in early Feb. price broke out upside of both the cloud and the Lagging Line broke out above its cloud, to both pullback and hold cloud support earlier this week, before rocketing higher yesterday. To me this looks like a breakout/test/breakout to put COIN back into a bullish posture in the near-term.

COIN – Daily

As such, with premiums quite elevated in this name (the implied vol of ATM puts is running at ~150%), we can sell a March 10th $70/$54 put spread ($54 was the low earlier this week). Based upon Wednesday’s closing mid-price of $6.775 for this spread, we can collect about 42% of the strike differential – a number I can easily live with for a credit spread. Do note that earnings come out next week on the 21st, so my plan is to carry this position through the earnings report.