DailyPlay – Conditional Opening Trade (SPY) Closing Trade (USO) Partial Closing Trade (LYFT) – May 4, 2023

Closing Trade

• USO – 92.68% Loss: Buy to Close 8 Contracts (or 100% of your remaining Contracts) June 2nd $67/$65 Put Vertical Spreads @ $1.58 Debit. DailyPlay Portfolio: By Closing the remaining 8 Contracts, we will be paying $1,264. We closed half of the contracts on May 3rd @ $1.30 Debit. Our average cost basis to exit this trade was therefore $1.44 and our average loss on this trade is -75.61%.

Partial Closing Trade

• LYFT – 21.05% Gain: Buy to Close 12 Contracts  (or 1/3 of your Contracts) May 12th $10/$9 Put Vertical Spreads @ $0.30 Debit. DailyPlay Portfolio: By Closing 12 of the 32 Contracts, we will be paying $360.

SPY Conditional Bearish Opening Trade Signal

View SPY Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 3 Contracts June 16th $410(ATM)/$385 Put Vertical Spreads @ $5.79 Debit per contract.

Total Risk: This trade has a max risk of $1,737 (3 Contracts x $579) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $579 to select the # contracts for your portfolio.

Counter Trend Signal: This ETF is currently neutral to bullish but expected to trade lower over the duration of this trade.

1M/6M Trends: Neutral/Bullish

Technical Score: 7/10

OptionsPlay Score: 182

Condition: Enter this position when SPY is trading between $410 and $413. Use the At The Money (ATM) strike for the Buy leg and $385 for the Sell leg when entering this trade.

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 Wednesday’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

We got the 25 bp. rate hike that was expected, but Fed Chair Powell’s comments that he did not think that inflation was falling enough was the catalyst just past 3pm ET to turn what was about as much of an 18-pt. SPX post-announcement rally into a loss of 29 pts (-0.70%). I think – even if AAPL beats today after the close – that we need to really consider that the recent failure north of SPX 4155 is again going to lead to a decline in what has been the general trading range that we’ve seen in much of 2023.

The oil market again slid hard yesterday, and it’s indicating a coming recession with it back in the $60s. There is no reason to be in our recent bullish USO play, so let’s exit the balance we still have on.

Our short LYFT May 12th $10/$9 put spread is profitable, but with only 9 days to go, I’m truly surprised that we’re only up 21% on the trade. The stock would need to quickly fall 8% in to make that $10 put go in the money. (In other words, in my head we should be up more money than we are.)  The OP software has this as a 65% chance of working out for us, but with today possibly marking a daily Combo +13 signal, let’s take 12 of the 32 spreads off today.

LYFT – Daily

We’re still short 11 IEF May 19th $99/$100 call spreads. The ETF closed at $100.25 yesterday. If price pulls back to near the $99.75-$99.50 area, let’s exit the balance of our position.

IEF – Daily

For a new idea, let’s revisit a recent one: putting on a bearish play in the SPY.  Now that the Fed is out of the way – and nothing particularly bullish came out of Powell’s press conference – odds get better that price can slide to near its cloud bottom in what has been an up and down trading environment.

When I dig a bit into the charts to get a sense of where to sell a minor rally, I see the SPY 410 to 413 range as where the ETF should face resistance from the recent action. As such, I’m going to recommend we use that zone to THEN get into buying June 16th ATM/$385 put spreads at the then current bid/offer mid-price. (The current ATM/$385 spread costs about 22% of the 23 strike differential. A rally to our entry zone should cost even less.)

SPY – Weekly

Many less-experienced traders are hesitant to get back into a trade idea that they just got stopped out of for a loss. To me, what happened in the past (even if the very recent past) has nothing to do with a new trade idea. In the best case, this works out well and we make good money on the trade.  In the worst case, we lose again if we see new highs. This is what trading is all about.