DailyPlay – Opening Trade (RCL) Closing Trade (KEY) – September 25, 2023

Closing Trade

• KEY – 55.12% Loss: Sell to Close 16 Contracts  (or 100% of your Contracts) Nov 17th $11 Calls @ $0.57 Credit. DailyPlay Portfolio: By Closing all 16 Contracts, we will receive $912. We initially opened these 16 Contracts on September 18 @ $1.28 Debit. Our average loss, therefore, is $71 per contract.

RCL Bearish Opening Trade Signal

View RCL Trade

Strategy Details

Strategy: ong Put Vertical Spread

Direction: Bearish

Details: Buy to Open 5 Contracts Nov 17th $90/$75 Put Vertical Spreads @ $4.07 Debit per contract.

Total Risk: This trade has a max risk of $2,035 (5 Contracts x $407) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $407 to select the # shares for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that has reached a point of exhaustion and is expected to continue lower.

1M/6M Trends: Bearish/Neutral

Technical Score: 10/10

OptionsPlay Score: 136

Stop Loss: @ $2.00 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 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

With the S&P 500 closing at its lowest level in over 2 months, it is at risk of completing a topping formation that puts $4100 to the downside in our sights. This week represents an important week for bulls to take control of not only equities but also bonds. With the 10-year yields breaking out above the 4.3% double top puts equity valuations into question. If we see yields remain elevated above 4.3%, the S&P will likely be pressured lower below its key $4300 level towards $4100. We need to manage positions in our portfolio by closing out the full position in KEY, after hitting our stop loss level.

At the same time I’m going to seek downside exposure in the travel industry with RCL. After rallying nearly 250% over the past year, RCL is starting to show some cracks after breaking below its key support of $95-97. The breakdown targets $75 to the downside and we can potentially profit from that by buying the Nov $90/75 Put Vertical @ $4.07 Debit. With a hypothetical portfolio of $100,000, I recommend risking 2% of the portfolio’s value to this trade, which is 5 Contracts for a risk of $2,035. We will set a stop loss on the put spread at 50% of the premium paid @ $2.00 Credit.