DailyPlay Portfolio Review

Investment Rationale

Bulls had a strong showing to start the week and stem last week’s losses. However, will there be further follow through this week? In my Monday Morning Macro Outlook session I laid out why I felt that we had a buy the dip opportunity to start off the week. So far we’ve seen the start of it but need to see it continue into the week for us to further confidence that downside risks have been mitigated. With GOOGL and TSLA earnings on deck tomorrow afternoon, all eyes are on earnings season to dictate the next leg of equities. Since our net positions are short theta I am comfortable holding them as we wait for further evidence and collect premium as we do so.

Our Trades

AZN – 24 DTE

Bullish Credit Spread – AZN gapped higher yesterday, pushing our gains to almost 25% on this trade. A break above $80 will likely lead to a continuation of this uptrend.

GOOGL – 38 DTE

Bullish Credit Spread – Google gapped higher yesterday to finish the trading day just short of breakeven. The next bullish target is at $190.

LULU – 24 DTE

Bullish Debit Spread – LULU also had a positive day, recovering some of the recent losses, as support at this level is holding.

MS – 17 DTE

Bullish Credit Spread – Support around the $100 mark held for MS yesterday and an upside recovery seems likely.

PYPL – 10 DTE

Bullish Credit Spread – PYPL recovered and is now trading in positive territory. A break above $62 will likely lead to upside gains, targeting $65 and then $68.

TSM – 31 DTE

Bullish Credit Spread – TSM bounced off $165 support yesterday. This warrants holding onto this position in anticipation of further upside.

DailyPlay Portfolio Review

Investment Rationale

Equity markets are sitting just above a major support level. We are waiting to see if these levels hold this week before entering any new positions to our DailyPlay portfolio. In the meantime our positions are net short theta so time is working in our favor as we hold our positions and wait for confirmation that bulls can maintain control this week.

Our Trades

AZN – 25 DTE

Bullish Credit Spread – AZN bounced on last week’s lows placing this trade back in positive territory.

GOOGL – 39 DTE

Bullish Credit Spread – Last week’s low has held as support which could lead to a bounce off this level.

LULU – 25 DTE

Bullish Debit Spread – LULU continued to slip but is still in an area of support. The next day or two would determine if support holds.

MS – 18 DTE

Bullish Credit Spread – MS had a strong move lower on Friday and is now trading around the $100 support. A bounce off this area is expected to warrant holding onto this position.

PYPL – 11 DTE

Bullish Credit Spread – We will keep a close eye on PYPL as we are 11 days out from expiry.

TSM – 32 DTE

Bullish Credit Spread – Currently trading around the Friday low of $165, which is an area of support. A bounce higher off this level is needed to remain in this trade.

DailyPlay Portfolio Review

Investment Rationale

The VIX closed above the 16 handle yesterday and technology has led this market lower. Many of you are asking if this is the start of a larger pullback or another opportunity to buy the dip. Based on what I’m seeing, my view is that it’s more likely a buy the dip type selloff and we are very much at a level where this could start to reverse back higher. We continue to see the RSP equal weight S&P remain very close to all-time highs. The swaps market is now pricing in 3 rate cuts for 2024, and the 10-year yields remain below 4.2%. The lack of participation that we highlighted over the past 7 months have reversed to a degree that we have never seen before. The Equal Weight S&P 500 has confirmed the current bullish trend. We’ve seen a healthy amount of sector rotation with flow out of Tech, Energy and Communications and flow into Discretionary, Materials, Industrials, Financials, Real Estate and Utilities. If this trend continues, we have a far healthier equity market rally with broader participation. Earnings reflect our largest risk at the moment and we will see a lot more by next week. Our DailyPlay Portfolio has a lot of long exposure which is why we are not adding further exposure on this buy the dip opportunity, and simply monitor our existing positions for exit opportunities.  

Our Trades

AZN – 28 DTE

Bullish Credit Spread – $78 support has held so far, which supports our bullish thesis, with 28 days left, we will continue to hold this position. 

GOOGL – 42 DTE

Bullish Credit Spread – Next level of support is $172, however, oversold conditions suggests a bounce is likely from here. 

LULU – 28 DTE

Bullish Debit Spread – Our counter trend position requires LULU to stay above $282, a break below that would warrant cutting losses. 

MS – 21 DTE

Bullish Credit Spread – We’re looking for $104 to hold, we have already taken profits on MS twice and now looking to at least break even on the last trade. 

PYPL – 14 DTE

Bullish Credit Spread – The chart continues to look more constructive as it makes higher highs, we’ll monitor to see if the $60 support level holds this week. 

TSM – 35 DTE

Bullish Credit Spread – With 35 days left to go and stop loss levels have not been triggered, we have the opportunity to continue holding this position and look for a bounce in semis. 

LULU Bullish Opening Trade Signal

Investment Rationale

Lululemon Athletica Inc. (LULU) has been out of favor for the past 8 months, but its time take another look now. The charts are beginning to show signs that sellers are exhausted, while the fundamentals are becoming compelling. With improving technical and fundamental outlooks, LULU presents an attractive risk to reward for long exposure.

Technical Analysis

After peaking in Dec above $500, LULU has declined over 40% since then. However, recent new lows have been coupled with positive divergence, suggesting that sellers are starting to get exhausted and further downside is potentially limited. Momentum is also showing signs of bottoming out, which aligns with the notion of a potential near-term recovery.

LULU – Daily

Fundamental Analysis

And when we look at the business, LULU is trading at 20x forward earnings (slight discount to the S&P 500) despite decent EPS and revenue growth expectations of 11% and 10%, respectively. These growth rates are supported by strong net margins of 16%. The valuation is attractive compared to the broader market, suggesting that LULU may be due for a rebound as investor sentiment shifts. 

Trade Details

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish Debit Spread

Details: Buy to Open 2 LULU Aug 16th $290/$320 Call Vertical Spreads @ $9.97 Debit per Contract.

Total Risk: This trade has a max risk of $1,994 (2 Contracts x $997) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $997 to select the # contracts for your portfolio.

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

1M/6M Trends: Bearish/Bearish

Relative Strength: 1/10

OptionsPlay Score: 108

Stop Loss: @ $4.99 Credit. (50% loss of premium)

View LULU 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 Wednesday’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 LULU Trade

Investment Rationale

As AXP breaks out above our $240 target price, we have made nearly 88% of the max profit on the trade with 30 days left to go. The risk to reward for continuing to hold this trade starts to look unattractive and I would use this opportunity to take profits on the trade. This allows us to redeploy this capital elsewhere where the risk/reward is skewed in our favor. 

Closing Trade

• AXP – 56.24% gain: Sell to Close 4 Contracts (or 100% of your Contracts) Aug 16th $220/$240 Call Vertical Spreads @ $17.64 Credit. 
  DailyPlay Portfolio:  By Closing all 4 Contracts, we will receive $7,056. We initially opened 2 Contracts on June 18 @ $9.63 Debit, and then anther 2 Contracts on July 3 @ $12.95 Debit. Our average gain, therefore, is $635 per contract with a total gain of $2,540 on our Portfolio.

GOOGL Bullish Opening Trade Signal

Investment Rationale

GOOGL is strategically positioned to capitalize on the growing demand for AI and cloud services, driven by its robust investments in AI technologies and the continued dominance of YouTube as a leading digital platform. The recent pullback in GOOGL’s stock price offers an attractive entry point for investors looking to gain exposure to these high-growth areas.

Technical Analysis

GOOGL has recently pulled back slightly within a strong bullish trend, creating an attractive entry point. The stock has consistently outperformed the market, and the recent dip offers a lower-risk opportunity to gain exposure. With positive momentum, the pullback provides a healthy consolidation within an overall strong bullish trend.

GOOGL – Daily

Fundamental Analysis

GOOGL trades at 24x forward earnings, which is reasonable given its strong growth prospects. The company is expected to grow EPS by 18% and revenues by 11%, significantly outpacing the average S&P 500 stock. Additionally, GOOGL boasts industry-leading net margins of 25.9%, reflecting its efficiency and profitability. 

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 3 GOOGL Aug 30, 2024 $185/$175 Put Vertical Spreads @ $3.59 Credit per Contract.

Total Risk: This trade has a max risk of $1,923 (3 Contracts x $641) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $641 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is in a strong bullish trend, and expected to continue higher.

1M/6M Trends: Bullish/Bullish

Relative Strength: 9/10

OptionsPlay Score: 92

Stop Loss: @ $7.18 Debit. (100% loss to the value of premium)

View GOOGL 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 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. 

View GOOGL Trade

Closing Trade

• MS – 42.86% gain: Buy to Close 7 Contracts (or 100% of your Contracts) August 16th $100/$95 Put Vertical Spreads @ $0.92 Debit. DailyPlay Portfolio: By Closing all 5 Contracts, we will pay $644. We opened these 7 Contracts on July 9 @ $1.61 Credit. The average gain, therefore, is $69 per contract with a total gain of $483. 

MS Bullish Opening Trade Signal

Investment Rationale

After rallying nearly 8% since our initial trade in MS and rolling it already once to take profits. This position requires us to manage once again ahead of earnings tomorrow morning. I believe that it is best to take profits on our 2nd trade and reset the short put vertical again to its current price. We are rolling our MS position to the Aug 9 $104/100 Put Vertical to collect another $1.61 in credits. 

We Roll this Trade by Closing the existing Trade and Opening a new one.

MS – Daily

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 8 Contracts August 9th $104/100 Put Vertical Spreads @ $1.67 Credit per Contract.

Total Risk: This trade has a max risk of $1,864 (8 Contracts x $233) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $233 to select the # contracts for your portfolio.

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

1M/6M Trends: Bullish/Bullish

Relative Strength: 9/10

OptionsPlay Score: 96

Stop Loss: @ $3.34 Debit. (100% loss to the value of premium)

View MS 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 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. 

View MS Trade

Closing Trade

• DHI – 55.82% loss: Sell to Close 13 Contracts (or 100% of your Contracts) August 16st $140/$130 Put Vertical Spreads @ $1.65 Credit. DailyPlay Portfolio: By Closing all 13 Contracts, we will receive $2,145. We opened 8 Contracts on June 25 @ $3.10 Debit and then another 7 Contracts on July 2 @ $4.75 Debit. The average loss, therefore, is $282. 

Additional PYPL Bullish Opening Trade Signal

Investment Rationale

As PYPL bounced off support at $58 our bullish thesis has been confirmed. With price moving over the $60 mark we expect to see an increase in momentum towards resistance at $68 where we will keep a close eye on this trade and its price action.

We are adding another 2% exposure to the PYPL trade and therefore opening 8 more Contracts using the same strike prices and expiry date as on June 21.

PYPL – Daily

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 8 Contracts August 2nd $60/$56 Put Vertical Spreads @ $1.58 Credit per Contract.

Total Risk: This trade has a max risk of $1,936 (8 Contracts x $242) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $242 to select the # contracts for your portfolio.

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

1M/6M Trends: Neutral /Bearish

Relative Strength: 3/10

OptionsPlay Score: 93

Stop Loss: @ $3.16 Debit. (100% loss to the value of premium received)

View PYPL 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 PYPL Trade

Additional AZN Bullish Opening Trade Signal

Investment Rationale

After pulling back and holding its $76 support level, AZN is starting to trend higher again and presents an opportunity for us to add another 2% of our portfolio’s exposure to this trade now that it is trading above the short strike of our Put Vertical Credit Spread.

We are adding to this position by risking another 2% of our Portfolio, using the same strike prices and expiry date.

AZN – Daily

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 13 Contracts August 16th $77.5/75 Put Vertical Spreads @ $0.96 Credit per Contract.

Total Risk: This trade has a max risk of $2,002 (13 Contracts x $154) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $154 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is trading higher and is expected to continue the uptrend.

1M/6M Trends: Bearish /Neutral

Relative Strength: 8/10

OptionsPlay Score: 95

Stop Loss: @ $1.92 Debit. (100% loss to the value of premium received)

View AZN 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 Wednesday’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 AZN Trade

TSM Bullish Opening Trade Signal

Investment Rationale

There are very few AI-related semiconductor stocks that are trading at reasonable valuations that we can justify buying at their current levels. However, TSM is positioned for continued growth due to the semiconductor industry’s reliance on TSM’s foundries and remains attractively valued with substantial upside potential. 

Technical Analysis

TSM recently made a new all-time high and broke out above a double top at $184 on higher-than-average volume, signaling strong bullish momentum. The stock has also shown impressive relative strength, consistently outperforming the overall market. And momentum recently turned positive again, supporting the case for a continuation of the bullish trend. 

TSM – Daily

Fundamental Analysis

From a valuation perspective, TSM trades at a very reasonable 21x forward earnings. This is especially attractive given the company’s strong growth metrics, with expected EPS growth of 23% and revenue growth of 22%, both significantly higher than the average S&P 500 company. Additionally, TSM boasts industry leading net margins of 38%, indicating efficient operations and profitability.

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 2 Contracts August 23rd $185/$170 Put Verticals @ $6.32 Credit per Contract.

Total Risk: This trade has a max risk of $1,736 (2 Contracts x $868) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $868 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is in a strong bullish trend.

1M/6M Trends: Bullish/Bullish

Relative Strength: 10/10

OptionsPlay Score: 96

Stop Loss: @ $12.64 Debit (100% loss to the value of premium)

View TSM 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 Tuesday’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 TSM Trade