DailyPlay – Opening Trade (UAL) – October 31, 2023

UAL Bullish Opening Trade Signal

View UAL Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 13 Contracts Dec 15th $35/$40 Call Vertical Spreads @ $1.58 Debit per contract.

Total Risk: This trade has a max risk of $2,054 (13 Contracts x $158) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $158 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bullish trade on a stock that is expected to bounce higher off support.

1M/6M Trends: Bearish/Bearish

Relative Strength: 2/10

OptionsPlay Score: 105

Stop Loss: @ $0.80 Credit. (50% loss on premium paid)

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 Monday’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

Despite rallying over 1% after last week’s selloff, bonds continued to sell off and yields climbed above 4.85%. This remains the primary headwind for equities alongside an earnings season that is showing signs of uncertainty for the future. As we look for opportunities, we seek weak sectors that are showing signs of selloff exhaustion and have bounce potential. One sector worth paying attention to is the Airline industry. With oil prices moderating, and international travel continuing to show signs of strength, international carriers such as UAL stand to potentially benefit. Trading at only 3.5x forward earnings, UAL trades at a substantial discount to its historical valuations and presents a great bounce opportunity. I’m looking to Buy the Dec $35/$40 Call Vertical @ $1.58 Debit. With a hypothetical portfolio of $100,000, I recommend risking 2% of the portfolio’s value to this roll, which is 13 Contracts for a risk of $2,054. We will set a stop loss on the put spread at around 50% of the premium paid @ $0.80 Credit.

UAL – Daily