DailyPlay – Opening Trade (KRE) – June 26, 2023

KRE Bearish Opening Trade Signal

View KRE Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 8 Contracts Aug 18th $40/$44 Calls @ $1.51 Credit per contract.

Total Risk: This trade has a max risk of $1,992 (8 Contracts x $249) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $249 to select the # shares for your portfolio.

Trend Continuation Signal: This stock has been neutral to bearish and is expected to continue lower.

1M/6M Trends: Bearish/Bearish

Technical Score: 2/10

OptionsPlay Score: 104

Stop Loss: @ $3.02 Debit (100% loss).

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 Friday’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

Our bearish trade idea today is the Regional Banks ETF (KRE). KRE has underperformed relative to the Financial sector (XLF) due to concerns that smaller banks may be more vulnerable to the stress tests from the Fed, especially after the banking turmoil earlier this year. We have seen price action turn bearish after a small recovery and this provides an excellent opportunity to sell a call credit spread that collects roughly 37% of the vertical width. Our downside target will be the $34 – $35 area which also acted as the previous swing low. Therefore, we will be selling the August 18 $40/$44 call spread collecting $1.51 to gain neutral/bearish exposure on KRE.