DailyPlay – Opening Trade (ARCH) Partial Closing Trades (TLT, ADM, EBAY, BROS) – April 4, 2023

Partial Closing Trades

• TLT – 25.25% Loss: Sell to Close 1 Contract (or 50% of your remaining Contracts) April 6th $104.50/$114 Call Vertical Spreads @ $2.28 Credit. DailyPlay Portfolio: By Closing 1 of the remaining 2 Contracts, we will receive $228.
• ADM – 68.42% Gain: Buy to Close 2 Contracts (or 20% of your remaining Contracts) April 21st $77.50/$75 Put Vertical Spreads @ $0.30 Debit. DailyPlay Portfolio: By Closing 2 of the 10 Contracts, we will be paying $60.
• EBAY – 14.06% Gain:  Sell to Close 1 Contract (or 15% of your Contracts) April 21st Call Vertical Spreads @ $2.14 Credit. DailyPlay Portfolio: By Closing 1 of the 6 Contracts, we will receive $214.
• BROS – 38.46% Gain: Buy to Close 4 Contracts (or 25% of your Contracts) April 28th $30/$28 Put Vertical Spreads @ $0.48 Debit. DailyPlay Portfolio: By Closing 4 of the 16 Contracts, we will receive $192.

ARCH Bullish Opening Trade Signal

View ARCH Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 6 Contracts April 21st $135/$130 Put Vertical Spreads @ $1.75 Credit per contract.

Total Risk: This trade has a max risk of $1,950 (6 Contracts x $325) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $325 to select the # contracts for your portfolio.

Counter Trend Signal: This stock has been trading lower but is expected to respect support at this level.

1M/6M Trends: Bearish/Mildly Bearish

Technical Score: 6/10

OptionsPlay Score: 88

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 Monday’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 generally moved higher on Monday – though not the NDX. The SPX marked its highest close since mid- February as buyers are still in near-term control. In yesterday morning’s webinar, I mentioned that the important SPX resistance is ~4148 to 4215. With yesterday marking a Setup +6 count, we may see a move up into that zone the balance of this week, possibly culminating in a Setup +9 count on Thursday. (Don’t forget that the market is closed on Friday for Good Friday.)

SPX – Daily

I have built a predominantly long portfolio for us in anticipation of the current upmove that started from the failure to break the weekly bearish Propulsion Momentum level at 3864. As we start getting to the above-mentioned top of trading range resistance zone, we will be trimming most of those longs. We’ll start with the following today:

• TLT: Exit 1 of 2 long call spreads today. We’re down 25% and this expires on Thursday. Theta is hurting us. (The long TLT idea was right; the timing of entry was not.)
• ADM: Exit 2 of 10 short put spreads today. We’re up 68%.
• EBAY: Exit 1 of 6 long call spreads today. We’re up 14%.
• BROS: Exit 4 of 16 short put spreads. We’re up 38%.

Here’s a new idea to put on today (or any day this week that ARCH trades near $135. (It closed yesterday at $136.11.) To me, this chart looks like it’s done the work that it needed to at the bottom end of the range, and it continues to find support there. With earnings on April 25th, we’d have to use the April 21 expiration. The $135/$130 put spread went out at $1.75 yesterday – about 35% of the strike differential. Though I usually like to capture some 40% or more of the diff, this is a short-term play that the stock won’t likely trade much lower before earnings – giving us the chance to capture the bulk of the premium (and the theta component should largely come into play starting mid- to late- next week).

ARCH – Daily