DailyPlay – Opening Trade (BLK) Closing Trades (BMY, INTC) – April 11, 2024

Closing Trades

• BMY – 57.84% loss: Sell to Close 12 Contracts (or 100% of your Contracts) May 17th $52.50/$57.50 Call Vertical Spreads @ $0.78 Credit. DailyPlay Portfolio: By Closing all 12 Contracts, we will receive $936. We opened these 12 Contracts on March 28 @ $1.85 Debit. The average loss, therefore, is $107 per contract, with a total loss of around 1% of our Portfolio.
• INTC – 67.65% Gain: Sell to Close 20 Contracts (or 100% of your Contracts) May 17th $42/$37 Put Vertical Spreads @ $3.41 Credit. DailyPlay Portfolio: By Closing all 20 Contracts, we will receive $6,820. We opened 12 of the 20 Contracts on March 28 @ $1.57 Debit, and then another 8 Contracts on April 5 @ $2.72 Debit. The average gain, therefore, is $138 per contract, with a total gain of around 2.8% of our Portfolio.

BLK Bearish Opening Trade Signal

Investment Rationale

As we start another earnings season, financials will kick things off at the end of this week. Blackrock reports Friday morning and has recently started to show some cracks in their business and I have concerns of a weakening outlook for the world’s largest asset manager.

Technical Analysis

If we start with a longer term chart, we see that after spending 2 years trading below its key $750 resistance level, it finally broke out at the end of last year. But so far, the breakout has not carried higher and momentum is starting to show exhaustion with the negative divergence. This leads me to believe that in the short run, it’s more likely to revisit $750 than continue higher. And if we Zoom in, we see that the $790 short term support was just broken along with underperformance relative to the S&P 500 and momentum has turned negative (MACD). This weakness going into earnings is more likely a signal for further downside.

BLK – Daily

Fundamental Analysis

And if we dive into the business, growth rates for both top and bottom line are nominal. Revenue and EPS has both grown by only 5-6% per year over the past 5 years and analysts aren’t expecting a significant uptick going forward. This is reflected in the valuation of 22x earnings, which isn’t significantly over or undervalued now. So, I anticipate this to trade more on the outlook for asset prices going forward since BLK’s model is based on assessing fees for AUM. If assets were to decrease, so does revenue. With yields rising and rate cut expectations declining, I expect their asset growth projections to also slow.

Trade Details

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish Debit Spread

Details: Buy to Open 2 Contracts April 19th $780/$750 Put Vertical Spreads @ $8.65 Debit.

Total Risk: This trade has a max risk of $1,730 (2 Contracts x $865) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $865 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that failed to break higher, and is expected to pull back.

1M/6M Trends: Bearish/Neutral

Relative Strength: 8/10

OptionsPlay Score: 136

Stop Loss: @ $4.33 Credit. (50% loss of premium paid)

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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. 

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