DailyPlay Updates – March 27, 2023

Investment Rationale

Here’s a potential hedge play to an idea we already have on: We are bearish the QQQ near the upper end of its trading range, by being long a put spread that expires in 10 days. Now that the Russell 2000 ETF (IWM) is nearing its lower end of its range, we can look to get long it. Ideally, I’d like to sell a put spread on it, but it’s priced way too cheaply (i.e., only receiving 25% of the strike differential I was looking at), so I’m forced to look at buying a call spread instead. But the one I was looking to buy cost 35% of the strike differential, so they’re too expensive. So, “what’s a choosy mother to do”? Well, in this case, maybe it’s just better to buy ~$2000 worth of the ETF, or approximately 11 shares of IWM.

IWM – Weekly

If the QQQ closes any day above last week’s high of $315.25, we’ll get out of the bearish QQQ spread (but hopefully be making money on our long IWM trade). Or, if IWM closes beneath $161, we’ll sell out of the IWM stock (but we’ll hopefully be making money on the QQQ trade).