DailyPlay – Opening Trade (UPS) – August 4, 2023

UPS Bearish Opening Trade Signal

View UPS Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 4 Contracts Sept 15th $180/$165 Put Vertical Spreads @ $4.51 Debit per contract.

Total Risk: This trade has a max risk of $1,800 (4 Contracts x $450) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $450 to select the # shares for your portfolio.

Trend Continuation Signal: This stock is neutral to bearish and is expected to continue lower.

1M/6M Trends: Neutral/Bearish

Technical Score: 5/10

OptionsPlay Score: 119

Stop Loss: @ $2.25 Debit (50% 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 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. 

Investment Rationale

AAPL and AMZN earnings yesterday showed that consumers remained resilient but showed signs of deceleration. One stock that is sensitive to lower shipping volumes and higher fuel costs is UPS. Reporting earnings next week, UPS is currently trading within a range, but the relative performance to its sector XLI is poor and new 52w lows, suggesting possible weakness going into earnings. With a union deal last week, UPS avoids a strike but adds substantial wage costs and will likely further erode margins. Couple the negative EPS and revenue growth with lower margins, UPS earnings is at risk of coming in on the lighter end. With this, I see an opportunity to seek bearish exposure going into earnings next week I’m looking to buy the Sept $180/165 Put Vertical @ $4.50 Debit. With a hypothetical portfolio of $100,000 we recommend risking 2% of it on this trade, which is 4 Contracts for a total risk of $1,800. Set a stop loss on the spread when losses exceed 50% of the premium paid, at about $2.25 Credit.

UPS – Daily