DailyPlay Taking Partial Profits (MS) – Feb 25, 2022

Taking Profits

• MS: 77% Gain: Buy to close Apr 1, 2022 $102/$109 Call Vertical @ $0.58 Debit. Close half of this position. For example, if 10 contracts were opened for this trade, we recommend closing 5 contracts.

With the S&P futures having traded in a 4.5% high-to-low range yesterday, we saw an average month’s price movement in a single day, and a VIX trading from a high near 38 to a close just above 30.  This is not an environment for us to be issuing 4-6 week option expiration trades, and I am suggesting we lay low for a bit and see what happens over the weekend.

However, we will soon be making trade ideas available that have updates distributed intra-day (e.g., when we see a target hit in the underlying security, and we want to trim or even exit an option trade we have on).  In fact, we will likely soon be entering/exiting options ideas more regularly based on what the underlying is doing in real-time.  That is, after all, what most successful traders are doing.

Tuning to the market, the S&P not only posted a possible near-term low on Thursday with a new daily Setup -9 count, but the other key levels l wrote about in yesterday’s Flash Note were all exceeded by the close. That means that the SPX is still holding above the key 4118 and 4164 support levels that were shown on the weekly chart. (We need to see if that stays true by today’s close, as week-ending closes are what matter on weekly charts).

Like the SPX, I see that Morgan Stanley (MS) also made a daily Setup -9 yesterday, so we will close out half of the MS position we put on last Thursday, when we sold the April 1 $102/$109 call vertical for about $2.50.  It closed last night at a $0.58 mid-price.

Let’s see what news pans out over the weekend, both in the Ukraine as well as if China tries to flex their muscles in Taiwan.  The China thing could be a whole new issue for investors to deal with. 

Rick Bensignor

Chief Market Strategist