DailyPlay – Opening Trade (PYPL) Closing Trades (CAT, AMD) – August 2, 2023

Closing Trades

• CAT – 138.20% Gain: Sell to Close 3 Contracts (or 100% of your Contracts) Sept 15th $260/$280 Call Vertical Spreads  @ $16.15 Credit. DailyPlay Portfolio: We opened this trade at $ 6.78 Debit, giving us a gain of $937 per contract.
• AMD – 30.33% Loss: Sell to Close 5 Contracts (or 100% of your Contracts) Aug 25th $110 Puts @ $3.33 Credit. DailyPlay Portfolio: We opened this trade at $ 4.78 Debit, giving us a loss of $145 per contract.

PYPL Bullish Opening Trade Signal

View PYPL Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 7 Contracts Sept 25th $75/$70 Put Vertical Spreads @ $2.01 Credit per contract.

Total Risk: This trade has a max risk of $2,093 (7 Contracts x $299) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $299 to select the # shares for your portfolio.

Trend Continuation Signal: This stock is bullish and is expected to break out above a trendline.

1M/6M Trends: Bullish/Bullish

Technical Score: 5/10

OptionsPlay Score: 94

Stop Loss: @ $4.02 Debit (100% 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 Tuesday’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

Going into today’s session, we have 2 open positions that need managing, CAT and AMD. CAT reported stronger than expected earnings and rallied above the $280 short strike on our vertical, an opportunity to take profits. By closing out the 3 Contracts of our Sept $260/280 Call Vertical @ $16.15 Credit we realized a 138% gain or $2,800 in profits. We also need to close out all contracts of our AMD trade as it reported better than expected earnings. We will update the pricing after the open.

Looking towards this evening’s earnings, PYPL stands out as an opportunity to take bullish exposure. After declining 75% over the past two years, PYPL is now trading at an attractive 14x forward earnings despite expecting 20% and 15% EPS growth for this year and next year. Additionally, the chart has finally started to breakout from a bearish trendline over the past year. With IV Rank currently at 51% we see an opportunity to Sell to Open the Sept $75/70 Put Vertical @ $2.01 Credit (40% of width). With a hypothetical portfolio of $100,000 we recommend risking 2% of it on this trade, which is 7 Contracts for a total risk of $2,093. Set a stop loss on the spread when losses exceed 100% of the premium collected, at about $4.00 Debit.

PYPL – Daily