Every investor has their eyes on the CPI print this morning that is set to release at 9:30AM to provide a better outlook to the Fed’s interest rate path. While we do not expect to see a significant surprise in the number, there has been a meaningful uptick in inflation in Oct that will show that the fight to 2% isn’t done just yet. While we wait for this important economic number, we will refrain from adding any further exposure in our DailyPlay portfolio. There are 2 positions that a potentially near take-profit levels, TMUS and UAL, which we will monitor closely after the CPI print and send out an alert if necessary intraday to close them out.

HAL Bearish Opening Trade Signal

View HAL Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 16 Contracts Jan 19th $38/$34 Put Vertical Spreads @ $1.22Debit per contract.ct.

Total Risk: This trade has a max risk of $1,952 (16 Contracts x $122) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $122 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that is bearish and expected to continue lower.

1M/6M Trends: Bearish/Neutral

Relative Strength: 10/10

OptionsPlay Score: 131

Stop Loss: @ $0.61 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 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

An unexpected outcome of the war in Israel has been the decline in oil prices. This has put significant pressure on oil field services companies such as HAL and SLB as shale producers seek to manage budgets into the close of 2023, a huge turnaround from Q2. The energy sector has lost its relative strength faster than it gained it and stocks like HAL are at risk of pulling back and breaking below a key support level at $38. If HAL were to break below $38, the risk is a pullback into the $31 support area. I’m playing for a potential break with a simple put vertical. Look to buy the Jan $38/$34 Put Vertical @ $1.22 Debit. With a hypothetical portfolio of $100,000, I recommend risking 2% of the portfolio’s value to this trade, which is 16 Contracts for a risk of $1,952. We will set a stop loss on the put spread at around 50% of the premium paid @ $0.61 Credit.

HAL – Daily 

Investment Rationale

If the S&P 500 notched a gain yesterday, it would have been the longest winning streak since Nov 2004. However, we saw the 10-year yields rise off its 4.5% base and equities rejected off its key $4400 resistance level. With earnings revisions ratios firmly negative for Q4, the outlook for equities continues to look uncertain. We currently have a health mix of bearish opportunities that take advantage of the attractive risk/reward ratios offered by the current market setup, and the sizable long position in severely oversold UAL. I do not suggest adding further exposure at this time in our portfolio. PSX is just shy of our take profit levels, which may trigger today. I hope that everyone has a great weekend and a great trading day.

MA Bearish Opening Trade Signal

View MA Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 2 Contracts Dec 22nd $390/$405 Call Vertical Spreads @ $6.77 Credit per contract.

Total Risk: This trade has a max risk of $1,646 (2 Contracts x $823) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $823 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is neutral.

1M/6M Trends: Neutral/Neutral

Relative Strength: 6/10

OptionsPlay Score: 110

Stop Loss: @ $13.50 Debit. (100% 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 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. 

Investment Rationale

As equity markets take a pause at these major resistance levels while 10-year yields stabilize around the 4.5% mark, the risk/reward favors bearish exposure. One opportunity that has remained my radar is MA. It recently broke below its key $390 support level, and now retesting it as resistance, providing an attractive risk/reward for short exposure. MA trades at over 27x forward earnings while expecting a decent 17% EPS growth, which is on the rich side. Moreover, MA has continued to underperform its sector since the beginning of 2023 and at risk of further weakness from these resistance levels. Despite IV Rank in the bottom 10%, the options skew still favors selling a call credit spread. I’m looking to sell the Dec 22nd $390/$405 Call Vertical @ $6.78 Credit. With a hypothetical portfolio of $100,000, I recommend risking 2% of the portfolio’s value to this trade, which is 2 Contracts for a risk of $1,646. We will set a stop loss on the put spread at around 100% of the premium collected @ $13.50 Debit.

MA – Daily 

Closing Trade

• AAPL – 80% Loss: Sell to Close Contracts (or 100% of your Contracts) Dec 15th $170/$155 Put Vertical Spreads @ $0.80 Credit. DailyPlay Portfolio: By Closing all 10 Contracts, we will be receiving $800. We initially opened 5 Contracts on Oct 4 @ $3.94 Debit, and then another 5 Contracts on Oct 26 @ $4.00 Debit. Our average loss, therefore, is $317 per contract. 

UAL Bullish Opening Trade Signal

View UAL Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 8 Contracts Dec 15th $35/$40 Call Vertical Spreads @ $2.47 Debit per contract.

Total Risk: This trade has a max risk of $1,976 (8 Contracts x $247) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $247 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bullish trade on a stock that is neutral to bearish, but expected to break out higher.

1M/6M Trends: Neutral/ Bearish

Relative Strength: 3/10

OptionsPlay Score: 90

Stop Loss: @ $1.25 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 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. 

Investment Rationale

Equity markets have paused just below the $4420 major resistance level at the moment. If we see a break above that level, the next upside target is $4565. We have a few positions that require adjusting based on the risk of a significant breakout higher. AAPL despite missing earnings has failed to follow through with a selloff and remains at a rich valuation. We must close out this trade at this point and manage our other positions. One of our positions that is best poised for a breakout higher in the markets is our UAL position. We have already added to this position and have another opportunity to add one last part before it can rally to our $40 upside target. I’m looking to add another 8 contracts of the Dec $35/40 Call Vertical @ $2.47 Debit. This would risk another 2% of our hypothetical portfolio of $100,000. We will also move our stop loss on the call spread to around 50% of the premium paid @ $1.25 Credit on the full 31 contracts. 

RY Bearish Opening Trade Signal

View RY Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 6 Contracts Dec 15th $85/$90 Call Vertical Spreads @ $1.87 Credit per contract.

Total Risk: This trade has a max risk of $1,878 (6 Contracts x $312) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $312 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that is trading sideways to bearish.

1M/6M Trends: Mildly Bullish/ Bearish

Relative Strength: 4/10

OptionsPlay Score: 101

Stop Loss: @ $3.75 Debit. (100% loss to the value of premium collected)

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

Equity markets have paused on the back of last week’s rally and is starting to doubt the Fed pause as 10-year yields started to climb again after dipping below 4.5%. I am still in the camp that this rally provides a favorable risk/reward entry for bearish exposure. Banks are particularly exposed in this interest rate environment and will likely continue to underperform if yields continue to rise and steepen. Recently Royal Bank of Canada broke below a key level of support at $86 and now has rallied back up to retest it as resistance. This is an ideal entry for short exposure where the risk/reward is extremely favorable. I’m looking to sell the RY Dec $85/90 Call Vertical @ $1.87 Credit. With a hypothetical portfolio of $100,000, I recommend risking 2% of the portfolio’s value which is 6 Contracts for a risk of $1,878. We will set a stop loss on the put spread at around 100% of the premium collected @ $3.75 Debit.

Closing Trade

• TMUS – 68.33% Gain: Buy to Close 6 Contracts (or 100% of your Contracts) Dec 15th $140/$135 Put Vertical Spreads @ $0.57 Debit. DailyPlay Portfolio: By Closing all 6 Contracts, we will be paying $342. We initially opened these 6 Contracts on Oct 30 @ $1.80 Credit. Our average gain, therefore, is $123 per contract. 

FDX Bearish Opening Trade Signal

View FDX Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 4 Contracts Jan 19th $240/$220 Put Vertical Spreads @ $5.18 Debit per contract.

Total Risk: This trade has a max risk of $2,068 (4 Contracts x $518) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $518 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that is neutral and expected to continue lower.

1M/6M Trends: Neutral/Neutral

Relative Strength: 7/10

OptionsPlay Score: 135

Stop Loss: @ $2.60 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 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

Equity markets staged an impressive rally last week on the back of Powell’s comments and a retreat on 10-year yields back to 4.5%. The question is how far can this rally go? Currently, we are watching the $4400-$4410 level as the major resistance level on the S&P that has to be broken for the rally to continue. Otherwise, the trend remains in a neutral to bearish trend. The risk/reward ratio after last week’s rally favors adding bearish exposure if you still believe in a bearish fundamental narrative as I do. Looking at our open positions, we are taking profits on is our initial TMUS Dec $140/135 Put Vertical that was sold for around $1.80 Credit, now trading at $0.57 Debit. We continue to hold our 2nd TMUS Dec $145/$140 Put Vertical.

Additionally one bearish position worth establishing where the risk/reward is favorable is FDX. We recently successfully close out a UPS bearish position and FDX fits the same thesis. It’s recent rally towards its $250 resistance level provides an attractive entry. With global shipping volumes continuing to decline, the fundamentals and outlook for industrial transport companies look shaky at best. I’d buy the Jan $240/$220 Put Vertical @ $5.17 Debit. With a hypothetical portfolio of $100,000, I recommend risking 2% of the portfolio’s value to this roll, which is 4 Contracts for a risk of $2,068. We will set a stop loss on the put spread at around 50% of the premium paid @ $2.60 Credit.

FDX – Daily

Closing Trade

• SBUX – 124.89% Loss: Buy to Close 10 Contracts (or 100% of your Contracts) Nov 24th $92/$98 Call Vertical Spreads @ $5.24 Debit. DailyPlay Portfolio: By Closing all 10 Contracts, we will be paying $5,240. We initially opened 5 of these Contracts on Oct 13 @ $2.22 Credit and then another 5 Contracts on Oct 27 @ $2.44 Credit. Our average loss, therefore, is $291 per contract. 

UAL Bullish Opening Trade Signal

View UAL Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 10 Contracts Dec 15th $35/$40 Call Vertical Spreads @ $1.95 Debit per contract.

Total Risk: This trade has a max risk of $1,950 (10 Contracts x $195) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $195 to select the # contracts for your portfolio.

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

1M/6M Trends: Bearish/Bearish

Relative Strength: 2/10

OptionsPlay Score: 99

Stop Loss: @ $1.00 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 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. 

Investment Rationale

Markets have roared back to life after Powell’s comments yesterday which has been interpreted as a dovish pivot. Let’s review a couple of our positions. SBUX earnings came in better than expected and provided strong guidance and has now moved substantially higher today. We must manage this by simply closing out the entire position. Our UAL position has started to take off from the lows and working towards our $41 target. I want to take this opportunity to add further exposure to this position. I’m looking to purchase 10 more contracts of the Dec $35/40 Call Vertical @ $1.95 Debit. With a hypothetical portfolio of $100,000, this would be adding 2% of the portfolio’s value, which is 10 Contracts for a risk of $1,950. We will move our stop loss on the put spread to around 50% of the premium paid @ $1.00 Credit on the full 23 contracts. 

TMUS Bullish Opening Trade Signal

View TMUS Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 6 Contracts Dec 15th $145/$140 Put Vertical Spreads @ $1.72 Credit per contract.

Total Risk: This trade has a max risk of $1,968 (6 Contracts x $328) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $328 to select the # contracts for your portfolio.

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

1M/6M Trends: Bullish/Bullish

Relative Strength: 8/10

OptionsPlay Score: 89

Stop Loss: @ $3.50 Debit. (100% 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 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. 

Investment Rationale

The Fed’s decision yesterday largest sets up for a peak in interest rate hikes for 2023 and potentially into the rest of 2024. This has pared 10-year yield below 4.8%, giving equities a bit of breathing room. The S&P 500 and Nasdaq-100 both sit just above their major support levels at $4220 and $14,500 and would need to close above it for bulls to potentially wrestle back control. One of our positions, TMUS has worked out nicely in a short amount of time and provides an opportunity to add some further exposure. We will maintain our current position of the Dec $140/$135 Put Vertical for further potential gain, while selling the Dec $145/140 Put Vertical @ $1.72 Credit for more premium. With a hypothetical portfolio of $100,000, I recommend risking another 2% of the portfolio’s value to this roll, which is 6 Contracts for a risk of $1,968. We will set a stop loss on the put spread at around 100% of the premium collected @ $3.50 Debit.

TMUS – Daily

PSX Bearish Opening Trade Signal

View PSX Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 6 Contracts Dec 15th $115/$120 Call Vertical Spreads @ $1.88 Credit per contract.

Total Risk: This trade has a max risk of $1,872 (6 Contracts x $312) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $312 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is trading neutral, but expected to break lower.

1M/6M Trends: Neutral/Neutral

Relative Strength: 9/10

OptionsPlay Score: 97

Stop Loss: @@ $3.75 Debit. (100% 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 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. 

Investment Rationale

With oil prices in retreat, energy stocks are losing its leadership and at risk of pulling back. If we look at PSX, it recently has started to complete the right shoulder in a head & shoulders topping formation. This is a sign that there could be some downside as oil prices trade near 6-month lows and broke below key level of support at $83. This will put pressure on energy stocks global breakeven costs continue to rise and demand continues to remain soft despite restrictions on supply. PSX also trades at the higher end of its valuation compared to its peers considering analysts are expecting EPS to contract by 15% in FY2024. While my view isn’t overly bearish, I think it’s an opportunity to establish a neutral to bearish stance by selling a call spread. I’m looking to sell the Dec $115/120 Call Vertical @ $1.88 Credit. With a hypothetical portfolio of $100,000, I recommend risking 2% of the portfolio’s value to this roll, which is 6 Contracts for a risk of $1,872. We will set a stop loss on the put spread at around 100% of the premium collected @ $3.75 Debit.

PSX – Daily