DailyPlay – Opening Trade (SMH) Closing Trade (DHR) – October 19, 2022

Closing Trade

• DHR – 10.55% Gain: Buy to Close 1 Contract Oct. 21st $265/$282.5 Call Vertical @ $5.68 Debit. DailyPlay Portfolio: By Closing the remaining 1 of 2 Contracts, we will be paying $568. We took partial profits for this trade on August 10 at a $7.50 Debit by closing 1 Contract. Therefore, the average loss on this trade is -3.78% and the average cost basis to exit this trade is $6.59 Debit.

SMH Bullish Opening Trade

View SMH Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 4 Contracts Nov. 18th $176/$168 Put Vertical Spreads @ $3.07 Credit.

Total Risk: This trade has a max risk of $1,972 (4 Contracts x $493).

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

1M/6M Trends: Bearish/Bearish

Technical Score: 3/10

OptionsPlay Score: 88

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. 

Please note these prices are based on the previous day’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. This will be reflected in the Portfolio tab within the OptionsPlay platform.

Investment Rationale

Stocks started sharply higher yesterday on follow-through buying from Monday, as there’s been a decided bullish sentiment shift this week. Despite a few attempts to knock them down over the course of Tuesday’s session, sellers couldn’t even get them down to unchanged, and the SPX tacked on another 1.14% while the Nasdaq 100 added 77 bps.

As I wrote in yesterday’s DP, yes, one should be doing some buying after the liftoff from last week’s new 2022 lows. Though we haven’t seen the mid-3400s level I wanted to be a buyer at, I do respect the slew of daily -13s; the weekly Setup -9 (that will only actually be marked if Friday’s close is less than 3693); and the monthly Setup -9 that exists (so long as the Oct. 31 close is less than 3785).

Today, let’s look to a new long idea in the very beaten down semiconductor space. When I look at the VanEck Semiconductor ETF (SMH), we see both a weekly Setup -9 that has precisely held support right at its weekly TDST Line at $169.24 on last week’s low. Thus, we’ll look to sell a Nov. 18th $176/$168 put spread, looking for this to hold up above those lows for the next month. This spread collects 38% of its 8-point strike differential (based upon Tuesday’s closing mid price of $3.08.)

SMH – Weekly

Also, a reminder to cover the remaining 2 SRE Oct. 21 $165/$145 put spreads on any day this week that going into the NYSE 4pm ET close is above $146.46.

And, let’s cover our last remaining DHR short $165/$182.5 call spread that expires on Friday. The stock is near our short strike so it’s time to exit.