DailyPay – Opening Trade (RSP) – May 30, 2023

RSP Bullish Opening Trade Signal

View RSP Trade

Strategy Details

Strategy: Long Stock

Direction: Bearish

Details: Buy 14 RSP @ $141.33 Debit per Share.

Total Risk: This trade has a max risk of $1,978.62 (14 Shares x $141.33) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $141.33 to select the # shares for your portfolio.

Counter Trend Signal: This stock has respected support and is expected to continue higher.

1M/6M Trends: Bearish/Bearish

Technical Score: 4/10

OptionsPlay Score: 109

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

The major stock indexes moved higher again on Friday, though don’t be fooled by those headlines: The equal-weighted SPX (RSP) closed on its third lowest Friday close of the year. There is no particular “market” this year, but several different ones.

RSP – Weekly

Frankly, when I look at the above chart, my eyes see a new small risk long play with a far greater potential upside to reach the downtrend line then I need to risk to a new 2023 Friday closing low (beneath $138.03 from mid-March).

However, selling a $141/$138 put spread yields just 30% of the strike differential – a definite “no go” in my book. A July 21st $141/$151 call spread costs 43% of the strike differential – also a “not a chance I’m going to lay that out”. So once again, the obvious bullish option trades make no sense to put on. So, my suggestion: simply buy the ETF shares in an appropriate dollar amount you are willing to risk for a share-holding position. On a theoretical $100K account, I’d risk no more than 3-5% on an un-leveraged idea like this, but stick with what you are comfortable with. Your sell-stop is that aforementioned Friday close beneath $138.03.