DailyPlay – Opening Trade (LYFT) Partial Closing Trade (BROS) – April 17, 2023

Partial Closing Trade

• BROS – 64.10% Gain: Buy to Close 2 Contracts (or 50% of your remaining Contracts) April 28th $30/$28 Put Vertical Spreads @ $0.28 Debit. DailyPlay Portfolio: By Closing 2 of the remaining 4 Contracts, we will be paying $56.

LYFT Bullish Opening Trade Signal

View LYFT Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 32 Contracts May 12th $10/$9 Put Vertical Spreads @ $0.41 Credit per contract.

Total Risk: This trade has a max risk of $1,888 (32 Contracts x $59) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $59 to select the # contracts for your portfolio.

Trend Continuation Signal: This stock has recently turned mildly bullish, which is expected to continue this trend.

1M/6M Trends: Mildly Bullish/Bearish

Technical Score: 3/10

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 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

Bulls like that the market continues to hold up in the face of macro news that still isn’t justifiably strong, but that in their opinion, is already “priced in”.  Data from the biggest mutual fund managers don’t agree. To me, I can’t pretend that I didn’t see the weekly SPY cloud chart get an upside breach of its cloud last week, but, the SPX did NOT get a similar upside breakout above its weekly cloud top (at 4155 from now through most of May). Seeing the SPX do so this Friday (or in any of the next several Friday closes) has to make me take some degree of bearishness away. That’s the logical way to play the market and this particular indicator. (The Dow has already broken above its weekly cloud top; the QQQ still has a few percent to go to do the same.)

SPY  – Weekly

Before I get into any position updates, there is something that I want to tell you that is not a standard option rule, or a Tony rule, but frankly – a Rick “guideline”. It has to do with opening gaps and playing ideas that we put out in Daily Plays. Here’s one that came into play last week, and is an example of a trade that I would not have necessarily entered myself near 10am because the change in the option price by 10am (when we mark our positions) was by 8+ percent lower than where it was on the prior day’s close. Honestly, that’s just above the 7% change in price I’m generally willing to put a trade on from how I first analyzed it the night before.

Now, we are making money on this trade because vol has come lower and the stock price is lower than where we sold this call spread. But be careful putting on spreads where the move is more than about 7% from where it was when I priced the idea. Sometimes, it is better to do the trade at a different time in the day, when price may adjust back more towards the prior day’s closing price. And sometimes, I just won’t put the trade on because the numbers no longer work out for me the way they had the night before, making, for example, perhaps a lesser percent of strike differential than I’m willing to accept.

Position-wise, we are long 2 BSX $48 calls that expire on Friday. The stock closed last Friday at $51.77, and we are up 157% on the two calls we have left. If any day this week, that premium percentage comes down to close less than 125%, exit the two calls. If not, we’ll try to hold this till Thursday.

We’re still short 4 BROS April 28th $30/$28 put spreads. When I put the trade on, the upside target I had in mind was the TDST line at $33.60, which has now been near two daily highs since then. As such, let’s take 2 of 4 spreads off today, giving us the flexibility to play with the last two but locking in a 64% gain on these two.

BROS – Daily

Lastly, for a new play, let’s revisit the bullish LYFT idea we had played earlier this year. With the stock two weeks ago again having bounced right on the -13s Risk level ($8.63), let’s look to this time to sell the May 12th $10/$9 put spread. (Earnings do come out on May 2nd.) We can collect $0.41 on this, which is 41% of the strike differential, and effectively brings our cost down to $9.59 if exercised. We know that we don’t want to be long on Friday closes beneath $8.63.

LYFT – Weekly