DailyPlay – Closing Trade (MCK) Partial Closing Trades (CSX, LYFT) – May 8, 2023

Closing Trade

• MCK – 9.2% Gain: Buy to Close 3 Contracts (or 100% of your remaining Contracts) May 19th $370/$380 Call Vertical Spreads @ $4.22 Debit. DailyPlay Portfolio: By Closing all 3 Contracts, we will be paying $1,266. We took partial profit on this trade when we closed 1 Contract on April 18 @ $3.80 Debit. Our average cost basis to exit this trade is therefore $4.12 Debit and our average gain is 11.46%.

Partial Closing Trades

• CSX – 66.19% Loss: Sell to Close 17 Contracts (or 50% of your Contracts) May 26th $31/$29 Put Vertical Spreads @ $0.23 Credit. DailyPlay Portfolio: By Closing 17 of the 34 Contracts, we will receive $391.
• LYFT – 118.42% Loss: Buy to Close 5 Contracts  (or 25% of your remaining Contracts) May 12th $10/$9 Put Vertical Spreads @ $0.83 Debit. DailyPlay Portfolio: By Closing 5 of the remaining 20 Contracts, we will be paying $415.

Investment Rationale

Stocks rallied sharply on Friday from AAPL’s conference call info and the surprise jobs report number and revisions. So, despite that large rally back up above SPX 4130, these numbers likely up the odds that the Fed may again raise rates in June (i.e., the economy is still too hot), though this week’s CPI and PPI numbers could confirm or ameliorate that from happening. After all, the Fed has told us that they are going to be quite data-dependent in determining if going forward they raise or pause the 10 straight rate hikes they’ve gone with.

Friday’s 1.85% rally brings the SPX right back to near the 4148/4155 area that has been the key resistance – and barring two Fridays ago close above there, last week did not confirm the breakout by closing lower on the week. So, we used strength on Friday to put on bearish trades by going long SPY June 16th puts at the 410; 411; 412; and 413 levels – one each – against selling the $385 puts on all four of them. If Friday’s big rally was an overshoot, and investors realize that rates likely stay “higher for longer”, then the market shouldn’t move to new highs again.

MCK had a big move up on Friday (3%), and is at $366 heading into earnings after the bell today. We’re now up only 9% on our short $370/$380 put spread, so let’s kick it out today before earnings.

CSX also had a decent upmove. The stock closed at $31.86 and we’re long 34 $31/$29 put spreads expiring May 26th. Though we’ve got time for this trade to work out, Friday’s rally made us down 66% on them, so we are forced to cover half of them today.

LYFT missed on earnings Friday morning and the stock got trashed. We are short the May 12th $10/$9 put spread, now down 118%. Take 5 of 20 off today, and 5 more off each day on Tues, Wed, and Thurs. However, if the stock looks like it is going to close beneath $8.60 on any day, kick the entire balance out.

LYFT – Daily