DailyPlay – Opening Trade (SHOP) Closing Trade (AAPL) – August 16, 2024

Closing Trade

• AAPL – 99.56% loss: Buy to Close 2 Contracts (or 100% of your Contracts) Sept 20th $210/$230 Call Vertical Spreads @ $13.67 Debit. 
  DailyPlay Portfolio:  By Closing both Contracts, we will pay $2,734. We initially opened these 2 Contracts on Aug 6 @ $5.66 Credit. Our average loss, therefore, is $801 per Contract.

Investment Rationale

With the S&P 500 breaking out above a key resistance level at $5,450, we must adjust our positioning to shift with the more bullish tone. This includes closing out the short AAPL position and keeping ETN on a short leash. On the other hand today’s retail sales numbers have provided a significant boost to our LULU and MSFT position and look for opportunities to take profits by early next week. 

SHOP Bullish Opening Trade Signal

Investment Rationale

As AMZN continues to erode the rights of sellers on their platform, SHOP has benefited from this overall trend and presents a compelling opportunity driven by strong earnings momentum and favorable fundamentals. The stock has recently seen significant upward momentum, pushing it above a recent resistance level and targets the highs from earlier in the year. 

Technical Analysis

The recent earnings momentum has catapulted SHOP higher, breaking above its $70 resistance level and 200-day moving average, a key area that now serves as support. Our immediate upside target is $80 on this breakout. 

SHOP – Daily

Fundamental Analysis

Despite a slight premium, SHOP’s growth metrics far outpace those of its software peers. With an EV to Forward Revenue ratio of 10x compared to the industry average of 8x, Shopify’s valuation is justified by its expected EPS growth of 185% and revenue growth of 21%, both of which are significantly higher than industry averages. Shopify is well-positioned to capitalize on its growth potential without compromising profitability as margins are inline with the industry. Despite IV Rank of only 5%, the skew currently favors selling a bullish credit spread on SHOP.

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 9 SHOP Sept 27th $74/$70 Put Vertical Spreads $1.69 Credit per Contract.

Total Risk: This trade has a max risk of $2,079 (9 Contracts x $231) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $231 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that bounced off support and is expected to continue higher.

1M/6M Trends: Bullish/Bullish

Relative Strength: 4/10

OptionsPlay Score: 104

Stop Loss: @ $3.38 Debit (100% loss to the value of premium)

View SHOP Trade

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. 

View SHOP Trade