DailyPlay – Rolling Trade (ADI) – November 22, 2024

Closing Trade

• ADI – 33% loss: Sell to Close 6 Contracts (or 100% of your Contracts) Nov 22/Nov 29 $202.50/$207.50 Put Diagonal Spreads @ $2.82 Credit. DailyPlay Portfolio: By Closing all 6 Contract, we will receive $1,692. We opened these 6 Contract on November 19 @ $4.25 Debit. As we are Rolling ADI, we will open a new position to generate a Net Credit of $1.85.

ADI Bearish Opening Trade Signal

Investment Rationale

Analog Devices, Inc. (ADI) recently broke down from its trading range with strong momentum and is underperforming the S&P 500. Our downside target is the $200 support level on the chart.

From a fundamental perspective, ADI appears overvalued compared to its peers. The company is scheduled to announce earnings before the market opens on Tuesday, November 26th, and the stock has experienced a recent uptick.

With the stock at $209.65, we executed a bearish put diagonal spread: so we will make 1.13 – .08 = 1.05 on the 202.5 put to start. 

• Buy 1 Nov 29th Put 207.50 (10 DTE) @ $4.50
• Sell 1 Nov 22nd Put 202.50 (3 DTE) @ $1.13 

Net debit for the spread: $3.37 as of Thursday’s close, the stock was at $213.96, leaving the Nov 22nd 202.50 strike put out-of-the-money (OTM). We plan to close this option contract for a few cents and roll into a Nov 29th put with the same strike. This adjustment will capture a significant implied volatility (IV) premium due to the upcoming earnings report and position us in a long put vertical spread that we can hold through the announcement.

As we are Rolling ADI, we are therefore closing the original trade and open a new position to generate a Net Credit of $1.85.

ADI – Daily

Trade Details

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish Debit Spread

Details: Buy to Open 20 ADI Nov 29 $207.50/$202.50 Put Vertical Spreads @ $0.97 Debit per Contract. With the $2.82 Credit that we receive when closing the original trade, we will generate a Net Credit of $1.85 ($2.82 – $0.97).

Total Risk: This trade has a max risk of $1,940 (20 Contract x $97) based on a hypothetical $100,000 portfolio normally risking 2%. We suggest using 2% of your portfolio value and divide it by $97 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that is expected to continue its bearish trajectory over the course of this trade.

1M/6M Trends: Bearish/Bearish

Relative Strength: 3/10

OptionsPlay Score: 149

Stop Loss: @ $0.49 (50% loss of premium paid)

View ADI 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 Thursday’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 ADI Trade