DailyPlay – Opening Trade (RY) – November 7, 2023

RY Bearish Opening Trade Signal

View RY Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 6 Contracts Dec 15th $85/$90 Call Vertical Spreads @ $1.87 Credit per contract.

Total Risk: This trade has a max risk of $1,878 (6 Contracts x $312) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $312 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that is trading sideways to bearish.

1M/6M Trends: Mildly Bullish/ Bearish

Relative Strength: 4/10

OptionsPlay Score: 101

Stop Loss: @ $3.75 Debit. (100% loss to the value of premium collected)

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 Monday’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

Equity markets have paused on the back of last week’s rally and is starting to doubt the Fed pause as 10-year yields started to climb again after dipping below 4.5%. I am still in the camp that this rally provides a favorable risk/reward entry for bearish exposure. Banks are particularly exposed in this interest rate environment and will likely continue to underperform if yields continue to rise and steepen. Recently Royal Bank of Canada broke below a key level of support at $86 and now has rallied back up to retest it as resistance. This is an ideal entry for short exposure where the risk/reward is extremely favorable. I’m looking to sell the RY Dec $85/90 Call Vertical @ $1.87 Credit. With a hypothetical portfolio of $100,000, I recommend risking 2% of the portfolio’s value which is 6 Contracts for a risk of $1,878. We will set a stop loss on the put spread at around 100% of the premium collected @ $3.75 Debit.