DailyPlay – Opening Trade (T) – August 4, 2022

Bullish Opening Trade Signal

View T Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 30 Contracts Sept 2, 2022 $18.50/$17.50 Put Verticals @ $0.31 Credit.

Total Risk: This trade has a max risk of $2,070 (30 Contracts x $69 per contract).

Counter Trend Signal: This is a Bullish trade on a stock that is experiencing a bearish trend. 

1M/6M Trends: Bearish/Bearish

Technical Score: 5/10

OptionsPlay Score: 80

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. 

Investment Rationale

Bulls and squeezed bears continue to push stocks higher, even with Fed officials contradicting investors’ beliefs that they were “pivoting” to a more dovish view. (I told you immediately after last week’s Powell press conference that they were not, and that the Street had that interpretation wrong.)  Nonetheless, the market continues to rip, and has significantly gained since the FOMC rate adjustment last Wednesday.

Something is amiss, given that the “No, we’re not done” statements didn’t undo the rally. In theory, it should have more than Tuesday’s one-day decline. Which means one very important thing to me: Bearish positioning was so strong that not even bad news can get the market down enough to give the shorts an out, leading me to think that we still need to do more upside squeezing before the market can actually fall again

Today, I’m looking at putting on a bullish play in a beaten down, unloved name: AT&T (T). Its weekly chart shows it still holding above its uptrend line; support from prior highs; and, by chance, now also shows its first daily Sequential -13 downside exhaustion signal of the year.

• You could simply choose to buy the stock outright.
• You could choose to buy a call spread.
• You could choose to sell an at-the-money or slightly in-the-money put
• You could choose to sell a put spread.

I’m not going to lay out each and every one of those idea’s trade parameters, but I’ll simply lay out selling a September 2nd $18.50/$17.50 put spread for what yesterday closed at $0.305. You’re collecting ~31% of the strike differential, and if exercised you’re essentially buying the stock at about $18.20, a bit lower than it is now.

T – Daily