DailyPlay – Opening Trade (MAR) – August 27, 2024

MAR Bearish Opening Trade Signal

Investment Rationale

The hotel industry is facing growing headwinds as consumer spending on travel and discretionary items begins to slow. MAR has already issued softer guidance for the second half of the year. Despite being a dominant player in the hospitality industry, Marriott’s high valuation raises concerns about its ability to sustain its current stock price. This environment creates an attractive opportunity to add bearish exposure to MAR. 

Technical Analysis

After breaking down below $230 support a few weeks ago, MAR has rallied back to this $230 resistance level and is now showing signs of further weakness. This is coupled with underperformance to the S&P 500 and momentum turning negative, which would target $213 initial targets to the downside with $180 extended targets. 

MAR – Daily

Fundamental Analysis

If we look at the business, MAR is trading at a significantly higher valuation relative to its industry peers, at 24x forward earnings versus an 18x average. Despite this premium valuation, the company’s growth metrics are in line or slightly below industry averages, with expected EPS growth of only 6% compared to the industry average of 19%. These metrics suggest that Marriott is modestly overvalued, particularly in an environment where growth prospects are more uncertain. 

Trade Details

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish Credit Spread

Details: Sell to Open 4 MAR Oct 4th $225/$235 Call Vertical Spreads $4.45 Credit per Contract.

Total Risk: This trade has a max risk of $2,220 (4 Contracts x $555) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $555 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that made a lower high in a downtrend, and is expected to continue lower.

1M/6M Trends: Neutral/Bearish

Relative Strength: 3/10

OptionsPlay Score: 111

Stop Loss: @ $8.90 Debit (100% loss to the value of premium)

View MAR Trade

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 Monday’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. 

View MAR Trade