DailyPlay – Partial Closing Trades (IEF, USO) – May 3, 2023

Partial Closing Trades

• IEF – 21.74% Loss: Buy to Close 11 Contracts (or 50% of your remaining Contracts) May 19th $99/$100 Call Vertical Spreads @ $0.56 Debit. DailyPlay Portfolio: By Closing 11 of the remaining 22 Contracts, we will be paying $616.
• USO – 58.54% Loss: Buy to Close 8 Contracts (or 50% of your Contracts) June 2nd $67/$65 Put Vertical Spreads @ $1.30 Debit. DailyPlay Portfolio: By Closing 8 of the 16 Contracts, we will be paying $1,040.

Investment Rationale

New regional banking woes – as in the “cockroaches” that I said weren’t likely the only ones we’d see – came crawling out yesterday with several other more local banks likely falling prey to similar issues to what already took down SVB, Signature, and more recently First Republic. Investors certainly didn’t like this latest news, and knocked the major indexes down a day ahead of the newest FOMC statement later today.

I’m not going to add a new trade idea given the impending news coming at 2pm and then Powell’s press conference at 2:30PM. But we do have a few portfolio updates to review:

1. Yesterday, I recommended you take off 2 of 4 long MDT calls, and also said that any day that the stock closes beneath $89.57 we’ll exit the last two.  Yesterday the stock closes at $90.23, so we still have the last two left (but continue to watch where this is trading each day going into the closing bell).
2. Yesterday, we sold out of 12 of 34 IEF short call spreads for a profit. The move back down in yields yesterday brought the balance to showing a loss. Let’s get out of 11 of the 22 today before the Fed announcement.
3. Crude Oil got beaten down badly yesterday; not what we wanted to see with our short USO put spread on. The ETF closed well beneath our hedge strike of $65, so we must get out of no less than half today, and I’ll be looking for any rally to exit the rest. (There is a weekly oil inventory report out today at 10:30am ET, so that news could potentially give a lift (or a further whack). If USO gets back to $65 after that report, I’d just exit the balance of the put spreads.

After having had a pretty good string of winners, we’ve now run into the opposite. This happens in trading, and do not let it discourage you. It’s all part of the game, as well as a good lesson to not let your ego get the best of you after a string of wins. Mr. Market is notorious for taking back what he giveth.