DailyPlay – Opening Trade (QQQ) – June 21, 2023

QQQ Bearish Opening Trade Signal

View QQQ Trade

Strategy Details

Strategy: Long Put

Direction: Bearish

Details: Buy to Open 3 Contracts July 3rd $365 Puts @ $3.76 Debit per contract.

Total Risk: This trade has a max risk of $1,128 (3 Contracts x $376) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 1% of your portfolio value and divide it by $376 to select the # shares for your portfolio.

Counter Trend Signal: This stock has been bullish but traded into an area of resistance and is expected to pull back lower.

1M/6M Trends: Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 85

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 Tuesday’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

Chairman Powell will testify in Washington today and this presents a risk to the markets that have shrugged off the idea of further rate hikes. With a resilient housing market and strong labor market, there is reason to believe that the Fed is comfortable with further rate hikes to bring inflation back to its 2% mandated target. Tech stocks are at the most risk of a pullback if the market is spooked by Chairman Powell’s testimony today and tomorrow. In my opinion, this is not enough of a reason to remove tech stocks from a portfolio or to take a bearish position, but it is prudent to consider buying some short-dated protection. With QQQ tagging the $370 resistance level, a potential reversal level, I advocate allocating 1% of our portfolio value to buy short-dated QQQ puts while volatility is low. If these next 2 days end up being a non-event, we can simply close out the trade by the end of this week. Buy 3 Contracts of the July 3 $365 Puts @ $3.76 Debit. 

QQQ – Daily