DailyPlay Portfolio Review

Investment Rationale

As traders await the Jobs numbers this morning, equities are hovering just around all-time highs. We expect a bad news is good news type event where any weakness in job numbers would imply more room for the Fed to cut rates, providing a headwind for equities. We are taking a pause from adding additional exposure in our DailyPlay portfolio until we have more clarity around these economic numbers. 

Our Trades

ADBE – 42 DTE

Bullish Credit Spread – We’re set up for a breakout above $460 going into earnings next week.

DHI – 28 DTE

Bearish Debit Spread – Weakness in housing continues as DHI fails to break higher and potentially retests $140 support. 

HD – 70 DTE

Bearish Debit Spread – Just sitting above the $330 support level that we are targeting a break below.

KR – 28 DTE

Bearish Debit Spread – Weakness has continued and we are targeting the $50.50 gap fill as our initial downside target.

NKE – 14 DTE

Bullish Debit Spread – Bottoming formation is looking more constructive but yet to break out above $96.

RACE – 42 DTE

Bearish Debit Spread – Continues to remain rangebound, but a break above $423 would invalidate our thesis and require closing out.

ADBE Bullish Opening Trade Signal

Investment Rationale

As we head into earnings for ADBE next week, we are taking a 3rd position on this stock in the last 2 months. We’re batting .500 so far and looking to improve on our win rate with an earnings play. Our investment thesis has not changed, Adobe is one of the few software plays that has an AI-related product that generates profits today. Expectations are for EPS to remain flat, but the stock is nearly 29% lower from its February peak, creating a significant upside opportunity going into an earnings catalyst. 

Technical Analysis

After declining 29% over the past 4 months, ADBE has printed a new recent low that has been coupled with positive divergence (lower low in price, but higher low in momentum). This suggests that the selling has exhausted and the opportunity is now to the upside. Additionally, ADBE generated a Counter Trend buy signal yesterday and has outperformed the market since. 

ADBE – Daily

Fundamental Analysis

ADBE trades at a very reasonable 25x forward earnings, especially when analysts expect the company to grow EPS and Revenues by 12-13% over the next few years and commands a very strong industry-leading 24% net margin. Since 2009, ADBE has only missed on earnings 3 times, so probabilities point to another beat this season.  

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 1 Contract July 19th $455/$425 Put Vertical Spread @ $11.77 Credit per Contract.

Total Risk: This trade has a max risk of $1,823 (1 Contract x $1,823) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $1,823 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: 93

Stop Loss: @ $23.54 Debit. (100% loss of premium received)

View ADBE 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 ADBE Trade

NKE Bullish Opening Trade Signal

Investment Rationale

With NKE poised to break out above its $95 resistance level and head toward our $100 gap-fill target, let’s take this opportunity to add another 2% of our portfolio’s value to this trade.

NKE – Daily

Trade Details

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish Debit Spread

Details: Buy to Open 7 Contracts June 21st $92.50/$100 Call Vertical Spreads @ $2.99 Debit per Contract.

Total Risk: This trade has a max risk of $2,093 (7 Contracts x $299) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $299 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that recently turned from neutral to bullish.

1M/6M Trends: Bullish/Neutral

Relative Strength: 2/10

OptionsPlay Score: 102

Stop Loss: @ $1.50 Credit. (50% loss of premium paid)

View NKE 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 NKE Trade

HD Bearish Opening Trade Signal

Investment Rationale

America’s largest Home Improvement store, HD has benefited from a long period of investor interest and traded at a premium valuation for years. However, the recent environment of slowing consumer spending and higher interest rates has finally caught up with it and risks are to the downside below $300. 

Technical Analysis

After a rally towards its all-time highs just shy of $400, HD has pulled back below its key $350 support level and now tests its $325 support and a risk of breaking lower. As the relative performance of HD reached a new 52-week low recently, it suggests that there are still further downside risks with targets the next support lower just below $300. 

HD – Daily

Fundamental Analysis

Trading at 21x forward earnings, HD is still trading at a premium given the fact that analysts are only expecting EPS and Revenue to grow at low single-digit levels and net margins sit below 10%. The reality is that with margins that are relatively thin and consumer spending further slowing down, HD cannot command the same type of premium valuation relative to the market. 

Trade Details

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish Debit Spread

Details: Buy to Open 3 Contracts Aug 16th $325/$300 Put Vertical Spreads @ $6.51 Debit per Contract.

Total Risk: This trade has a max risk of $1,953 (3 Contracts x $651) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $651 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that recently turned bearish.

1M/6M Trends: Bearish/Bearish

Relative Strength: 4/10

OptionsPlay Score: 140

Stop Loss: @ $3.25 Credit. (50% loss of premium paid)

View HD 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 HD Trade

Closing Trade

• PLTR – 42.50% loss: Sell to Close 13 Contracts (or 100% of your Contracts) June 21st $22/$18 Put Vertical Spreads @ $0.92 Credit. DailyPlay Portfolio: By Closing all 13 Contracts, we will receive $1,196. We opened these 13 Contracts on May 1 @ $1.60 Debit. The average loss, therefore, is $68. 

Investment Rationale

With the news of PLTR signing a new significant contract with Eaton it has now held its $20 major support level and the probability of it hitting our $18 target in the next 3 weeks is slim. It is time to cut this earnings play.

Closing Trade

• ADBE – 93.32% loss: Buy to Close 1 Contract (or 100% of your Contracts) June 21st $460/490 Put Vertical Spread @ $21.42 Debit. DailyPlay Portfolio: By Closing this 1 Contract, we will pay $2,142. We opened this 1 Contract on May 7 @ $11.12 Credit. As we rolled ADBE from a previous trade where we gained $536 with a return of 69% the loss is therefore $494.

DHI Bearish Opening Trade Signal

Investment Rationale

As many major consumer names trade closer to their 52-week lows as equity markets print new all-time highs, there are growing risks that the consumer is weaker than the economy suggests. One industry that is adjacent to discretionary is home builders. Recently, weakness in the home builders suggests that it may be heading in the direction of the discretionary sector and presents an opportunity to add short exposure in DHI. 

Technical Analysis

If we look at XHB, the Home Builders ETF, we see that it has continued to trade in a range between $100 and $110 over the past 4 months, however, the relative performance of XHB to the S&P 500 has started to underperform recently. This suggests that XHB is likely to revisit the bottom of the trading range and potentially break below it. And if we look at DR Horton (DHI) the largest of the home builders, it has recently traded in a similar range between $140 and $160 over the past 6 months, but the relative performance to its industry is poor and near its 52-week lows. This weakness suggests that it will revisit the $140 support level and potentially break lower, especially as momentum has recently turned negative.  

DHI – Daily

Fundamental Analysis

Now, looking at the business, DHI trades at 10.5x forward earnings, which is the upper bound of its historical average over the past 5 years. With some of the slowest expected EPS growth of only 4% among its peers, these valuations start to look expensive as 10-year yields climb above 4.6% again. 

Trade Details

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish Debit Spread

Details: Buy to Open 7 Contracts July 5th $140/$130 Put Vertical Spreads @ $2.95 Debit per Contract.

Total Risk: This trade has a max risk of $2,065 (7 Contracts x $295) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $295 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that recently turned bearish.

1M/6M Trends: Bearish/ Mildly Bearish

Relative Strength: 6/10

OptionsPlay Score: 128

Stop Loss: @ $1.48 Credit. (50% loss of premium paid)

View DHI 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 DHI Trade

KR Bearish Opening Trade Signal

Investment Rationale

As consumer stocks continue to underperform, supermarkets are notorious for operating on razor-thin margins. Kroger recently had a few months of stellar performance that pushed its valuation to well beyond its historical averages but is now at risk of a pullback. 

Technical Analysis

After a period of outperformance starting in Feb, KR has quickly reversed those gains and started to break below its key $54-55 support area along with strong underperformance. As momentum turns negative, KR looks set to close its gap at $50 and potentially revisit $46 extended downside targets. 

KR – Daily

Fundamental Analysis

Operating on razor-thin margins of 2%, KR’s 1% revenue growth that’s expected is not compelling considering its higher-than-average valuation. Trading at 12x forward earnings, KR is trading at a premium relative to itself and peers and at risk of multiple compressions. 

Trade Details

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish Debit Spread

Details: Buy to Open 17 Contracts July 5th $53/$49 Put Vertical Spreads @ $1.20 Debit per Contract.

Total Risk: This trade has a max risk of $2,040 (17 Contracts x $120) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $120 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that recently turned bearish.

1M/6M Trends: Bearish/Neutral

Relative Strength: 7/10

OptionsPlay Score: 134

Stop Loss: @ $0.60 Credit. (50% loss of premium paid)

View KR 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 KR Trade

RACE Bearish Opening Trade Signal

Investment Rationale

As Ferrari continues to print lower highs and lower lows with momentum turning negative, our position has finally swung into the green. Here is an opportunity for us to add some additional exposure as stocks start to turn lower in this higher interest environment. Still trading at over 49x forward earnings, RACE is at risk of a larger fall than many others. Look to add another 2% of our portfolio’s value to this bearish trade today. 

RACE – Daily

Trade Details

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish Debit Spread

Details: Buy to Open 2 Contracts July 19th $420/$390 Put Vertical Spreads @ $11.25 Debit per Contract.

Total Risk: This trade has a max risk of $2,250 (2 Contracts x $1,125) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $1,125 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that recently turned bearish.

1M/6M Trends: Bearish/Neutral

Relative Strength: 6/10

OptionsPlay Score: 120

Stop Loss: @ $5.63 Credit. (50% loss of premium paid)

View RACE 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 RACE Trade

DailyPlay Portfolio Review

Our Trades

ADBE – 28 DTE

Bullish Credit Spread – ADBE continues to trade within a tight range but remains just near our breakeven and at least 1 more week before it warrants rolling.

NKE – 28 DTE

Bullish Debit Spread – We are keeping a close eye on this position and a break below $90 would warrant closing this position.

PLTR – 28 DTE

Bearish Debit Spread – PLTR also moved in our favor yesterday and a break below $20.50 seems likely.

RACE – 56 DTE

Bearish Debit Spread – RACE has gained more traction and is almost at 10% gain.