DailyPlay – Opening Trade (IEF) – April 28, 2023

IEF Bearish Opening Trade Signal

View IEF Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 34 Contracts May 19th $99/$100 Call Vertical Spreads @ $0.42 Credit per contract.

Total Risk: This trade has a max risk of $2,006 (34 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.

Counter Trend Signal: This stock is bullish and is expected to pull back from a level of resistance.

1M/6M Trends: Neutral/Bullish

Technical Score: 6/10

OptionsPlay Score: 91

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 Thursday’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 surged on Thursday after solid big cap tech results on Wednesday after the bell, and then Amazon beating last after yesterday’s close has certainly given tech a nice run to end a month that they’ve underperformed by about 200 bps. going into the last day of April. Furthermore, today certainly sets itself up to be a day that could finally see the SPX close above the 4155 level, and potentially force many shorts to run for the hills next week.

Yesterday we covered 2 of 6 short SPY spreads to lock in some profit. By the end of the day, the other four turned into a losing position given the 2% gain in the market. We’ll exit the other four late in the day today should the SPX and SPY be trading above their weekly cloud tops going into the close.

We’re up 382% on the four remaining MDT calls we own. If the stock isn’t trading above $91.70 going into today’s close, we’ll take one more contract off then.

Lastly, here’s a new idea that is pure tactical trading and simply leaning on a resistance level with a tight stop. Consider shorting the May 19th IEF $99/$100 call spread. It went out yesterday at $0.415 mid, representing us collecting ~41% of the strike differential. Should the IEF close any day above the recent high point of $100.78, we exit.

IEF – Weekly