DailyPlay – Opening Trade (META) – January 4, 2023

META Bullish Opening Trade

View META Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 3 Contracts Feb 3rd $123/$113 Put Vertical Spreads @ $3.72 Credit.

Total Risk: This trade has a max risk of $1,884 (3 Contracts x $628).

Counter Trend Signal: This is a Bullish trade on a stock that is experiencing a neutral to bullish trend.

1M/6M Trends: Bullish/Neutral

Technical Score: 3/10

OptionsPlay Score: 87

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on the previous day’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

Stocks first rallied and then declined on a PMI figure that didn’t give bulls any more juice to push higher. Stock indexes were down yesterday, but at least importantly in the short-term, the SPX 3814 level still held as support on the close.

I find it interesting (and anguishing) how difficult it was to come up with a DP for today that meets our general guidelines for putting on vertical call or put spreads that also don’t cost too much or collect too little, respectively. Option prices seem to be the wrong way for most ideas I would enter based upon the chart work I do. But, after over an hour looking, I found an idea with right pricing for what I want us to do.

META has advanced sharply after bottoming in the fall at ~$89.  It’s now $124 and was up nicely in yesterday’s down tape. Though it is now close to filling a prior unfilled gap, I think analysts are just getting started in upgrading it, and that it still has decent upside relative to downside risk. As such, let’s look to sell a Feb. 3rd $123/$113 put spread. It closed on Tuesday at $3.725 mid- , which is 37% of the strike differential. Meta reports earnings on Feb. 1, so we will be out of it just before then if it trades our way over the next month.

META – Daily

Last week we took off one of three remaining short GE Jan. 6th $85/$90 put spreads that we’ve made good money on since entering almost a month ago. Let’s take one more off today, as price is getting closer back to the $85 level. The last one we’ll take off tomorrow after we see what the Fed minutes say later today.