DailyPlay – Opening Trade (AMT) Closing Trade (NVDA) – August 24, 2023

Closing Trade

• NVDA – 27.47% Loss: Sell to Close 1 Contract (or 100% of your Contracts) Sept 1st $445/$385 Put Vertical Spread @ $12.17 Credit. DailyPlay Portfolio: By Closing this 1 Contract, we will receive $1,217. Our loss is therefore $563 per contract. Please note that the cost basis may be slightly different when we close this position after market opening.

AMT Bullish Opening Trade Signal

View AMT Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 4 Contracts Oct 20th $180/$195 Call Vertical Spread @ $4.85 Debit per contract.

Total Risk: This trade has a max risk of $1,940 (4 Contract x $485) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $485 to select the # shares for your portfolio.

Counter Trend Signal: This stock is bearish and is expected to bounce higher off a trendline.

1M/6M Trends: Bearish/Bearish

Technical Score: 3/10

OptionsPlay Score: 110

Stop Loss: @ $2.40 Credit (50% loss).

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

It’s always difficult to face a trade where you were incorrect in the view and the trade does not go in the direction of your outlook. That certainly was the case with NVDA. It’s common when this happens to want to hold onto the losing trade, hoping that it comes back in the direction instead of crystallizing the loss. But, facing the pain and accepting a loss is an important part of building the emotional resilience to becoming a profitable trader. As much as it hurts to take a loss the very next day on this trade, we must do so in order to keep losses limited and focus our energy and efforts on our winning positions. We will be closing out the 1 contract of NVDA put spread that we have and update the price on it after the open.

Looking ahead, I see an opportunity in AMT that recently traded to a new 52-week low. However, there are signs that the selloff is exhausted and near a trend reversal. As AMT made a newer low, momentum did not confirm that suggesting a bounce ahead is more likely. AMT’s consistent growth, high margins and a healthy 3.5% dividend yield makes it a lower risk buy near 52-week lows. I’m going to further reduce my risk by using a options strategy to play for the bounce. Buy to Open Oct $180/195 Call Vertical @ $4.85 Debit. With a hypothetical portfolio of $100,000, I recommend risking 2% of the portfolio’s value on this trade, which is 4 Contracts for a risk of $1,940. We will set our stop loss on the entire position to 50% of the premium paid of $2.40 Credit. 

AMT – Daily