Closing Trade

• MCK – 9.2% Gain: Buy to Close 3 Contracts (or 100% of your remaining Contracts) May 19th $370/$380 Call Vertical Spreads @ $4.22 Debit. DailyPlay Portfolio: By Closing all 3 Contracts, we will be paying $1,266. We took partial profit on this trade when we closed 1 Contract on April 18 @ $3.80 Debit. Our average cost basis to exit this trade is therefore $4.12 Debit and our average gain is 11.46%.

Partial Closing Trades

• CSX – 66.19% Loss: Sell to Close 17 Contracts (or 50% of your Contracts) May 26th $31/$29 Put Vertical Spreads @ $0.23 Credit. DailyPlay Portfolio: By Closing 17 of the 34 Contracts, we will receive $391.
• LYFT – 118.42% Loss: Buy to Close 5 Contracts  (or 25% of your remaining Contracts) May 12th $10/$9 Put Vertical Spreads @ $0.83 Debit. DailyPlay Portfolio: By Closing 5 of the remaining 20 Contracts, we will be paying $415.

Investment Rationale

Stocks rallied sharply on Friday from AAPL’s conference call info and the surprise jobs report number and revisions. So, despite that large rally back up above SPX 4130, these numbers likely up the odds that the Fed may again raise rates in June (i.e., the economy is still too hot), though this week’s CPI and PPI numbers could confirm or ameliorate that from happening. After all, the Fed has told us that they are going to be quite data-dependent in determining if going forward they raise or pause the 10 straight rate hikes they’ve gone with.

Friday’s 1.85% rally brings the SPX right back to near the 4148/4155 area that has been the key resistance – and barring two Fridays ago close above there, last week did not confirm the breakout by closing lower on the week. So, we used strength on Friday to put on bearish trades by going long SPY June 16th puts at the 410; 411; 412; and 413 levels – one each – against selling the $385 puts on all four of them. If Friday’s big rally was an overshoot, and investors realize that rates likely stay “higher for longer”, then the market shouldn’t move to new highs again.

MCK had a big move up on Friday (3%), and is at $366 heading into earnings after the bell today. We’re now up only 9% on our short $370/$380 put spread, so let’s kick it out today before earnings.

CSX also had a decent upmove. The stock closed at $31.86 and we’re long 34 $31/$29 put spreads expiring May 26th. Though we’ve got time for this trade to work out, Friday’s rally made us down 66% on them, so we are forced to cover half of them today.

LYFT missed on earnings Friday morning and the stock got trashed. We are short the May 12th $10/$9 put spread, now down 118%. Take 5 of 20 off today, and 5 more off each day on Tues, Wed, and Thurs. However, if the stock looks like it is going to close beneath $8.60 on any day, kick the entire balance out.

LYFT – Daily

Investment Rationale

Pacific West looks to be the latest casualty of the regional bank space, and they could be gone shortly. These other “cockroaches” – which I previously warned would likely tome out of the woodwork are doing just that, and we may start having weekly events like this going forward. So, even given AAPL trading up to near $170 after their earnings came out yesterday, I’d still be looking to sell rallies (and as a reminder, we’re still going to look to go long the SPY June 16th $410; $411, and a $413 put spreads (against selling the $385 strike) if the opportunity comes today or early next week).

I missed seeing that LYFT was set to report earnings yesterday, for I would have been out of virtually all of our short $10/$9 put spreads before they came out. They missed expectations, and a ~20% gain (of which we took partial profits on yesterday morning) turned into a loss. I accept full responsibility for missing that release date, and I will work with our team to make sure that there is a way that I have knowledge of when earnings are next out for every open position we have on.

That being said, we still need manage the trade. With our still having 20 spreads on, let’s see if the stock gets any bounce today from near the $9 level that it traded down to late Thursday afternoon. The reaction seems overdone, and the $8.87 level was the lowest close of late March. We’ll figure out an exit strategy next week.

LYFT – Daily

Elsewhere, MDT broke the $89.57 stop out level we were using to exit the final two long $82.5 calls we’ve had on, so you should have sold out of them yesterday. The large gain we made in this trade has helped offset some of the recent losses.

We are still short 11 IEF $99/$100 call spreads. The ETF rejected the early April high yesterday on its intraday high, so we may still get a chance to kick out of these on a pullback to near the $99.50 area. Look to exit them if that opportunity comes, but also exit the spreads using a close above $101 as your buy-stop level.

IEF – Daily

Closing Trade

• USO – 92.68% Loss: Buy to Close 8 Contracts (or 100% of your remaining Contracts) June 2nd $67/$65 Put Vertical Spreads @ $1.58 Debit. DailyPlay Portfolio: By Closing the remaining 8 Contracts, we will be paying $1,264. We closed half of the contracts on May 3rd @ $1.30 Debit. Our average cost basis to exit this trade was therefore $1.44 and our average loss on this trade is -75.61%.

Partial Closing Trade

• LYFT – 21.05% Gain: Buy to Close 12 Contracts  (or 1/3 of your Contracts) May 12th $10/$9 Put Vertical Spreads @ $0.30 Debit. DailyPlay Portfolio: By Closing 12 of the 32 Contracts, we will be paying $360.

SPY Conditional Bearish Opening Trade Signal

View SPY Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 3 Contracts June 16th $410(ATM)/$385 Put Vertical Spreads @ $5.79 Debit per contract.

Total Risk: This trade has a max risk of $1,737 (3 Contracts x $579) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $579 to select the # contracts for your portfolio.

Counter Trend Signal: This ETF is currently neutral to bullish but expected to trade lower over the duration of this trade.

1M/6M Trends: Neutral/Bullish

Technical Score: 7/10

OptionsPlay Score: 182

Condition: Enter this position when SPY is trading between $410 and $413. Use the At The Money (ATM) strike for the Buy leg and $385 for the Sell leg when entering this 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. 

Investment Rationale

We got the 25 bp. rate hike that was expected, but Fed Chair Powell’s comments that he did not think that inflation was falling enough was the catalyst just past 3pm ET to turn what was about as much of an 18-pt. SPX post-announcement rally into a loss of 29 pts (-0.70%). I think – even if AAPL beats today after the close – that we need to really consider that the recent failure north of SPX 4155 is again going to lead to a decline in what has been the general trading range that we’ve seen in much of 2023.

The oil market again slid hard yesterday, and it’s indicating a coming recession with it back in the $60s. There is no reason to be in our recent bullish USO play, so let’s exit the balance we still have on.

Our short LYFT May 12th $10/$9 put spread is profitable, but with only 9 days to go, I’m truly surprised that we’re only up 21% on the trade. The stock would need to quickly fall 8% in to make that $10 put go in the money. (In other words, in my head we should be up more money than we are.)  The OP software has this as a 65% chance of working out for us, but with today possibly marking a daily Combo +13 signal, let’s take 12 of the 32 spreads off today.

LYFT – Daily

We’re still short 11 IEF May 19th $99/$100 call spreads. The ETF closed at $100.25 yesterday. If price pulls back to near the $99.75-$99.50 area, let’s exit the balance of our position.

IEF – Daily

For a new idea, let’s revisit a recent one: putting on a bearish play in the SPY.  Now that the Fed is out of the way – and nothing particularly bullish came out of Powell’s press conference – odds get better that price can slide to near its cloud bottom in what has been an up and down trading environment.

When I dig a bit into the charts to get a sense of where to sell a minor rally, I see the SPY 410 to 413 range as where the ETF should face resistance from the recent action. As such, I’m going to recommend we use that zone to THEN get into buying June 16th ATM/$385 put spreads at the then current bid/offer mid-price. (The current ATM/$385 spread costs about 22% of the 23 strike differential. A rally to our entry zone should cost even less.)

SPY – Weekly

Many less-experienced traders are hesitant to get back into a trade idea that they just got stopped out of for a loss. To me, what happened in the past (even if the very recent past) has nothing to do with a new trade idea. In the best case, this works out well and we make good money on the trade.  In the worst case, we lose again if we see new highs. This is what trading is all about.

Partial Closing Trades

• IEF – 21.74% Loss: Buy to Close 11 Contracts (or 50% of your remaining Contracts) May 19th $99/$100 Call Vertical Spreads @ $0.56 Debit. DailyPlay Portfolio: By Closing 11 of the remaining 22 Contracts, we will be paying $616.
• USO – 58.54% Loss: Buy to Close 8 Contracts (or 50% of your Contracts) June 2nd $67/$65 Put Vertical Spreads @ $1.30 Debit. DailyPlay Portfolio: By Closing 8 of the 16 Contracts, we will be paying $1,040.

Investment Rationale

New regional banking woes – as in the “cockroaches” that I said weren’t likely the only ones we’d see – came crawling out yesterday with several other more local banks likely falling prey to similar issues to what already took down SVB, Signature, and more recently First Republic. Investors certainly didn’t like this latest news, and knocked the major indexes down a day ahead of the newest FOMC statement later today.

I’m not going to add a new trade idea given the impending news coming at 2pm and then Powell’s press conference at 2:30PM. But we do have a few portfolio updates to review:

1. Yesterday, I recommended you take off 2 of 4 long MDT calls, and also said that any day that the stock closes beneath $89.57 we’ll exit the last two.  Yesterday the stock closes at $90.23, so we still have the last two left (but continue to watch where this is trading each day going into the closing bell).
2. Yesterday, we sold out of 12 of 34 IEF short call spreads for a profit. The move back down in yields yesterday brought the balance to showing a loss. Let’s get out of 11 of the 22 today before the Fed announcement.
3. Crude Oil got beaten down badly yesterday; not what we wanted to see with our short USO put spread on. The ETF closed well beneath our hedge strike of $65, so we must get out of no less than half today, and I’ll be looking for any rally to exit the rest. (There is a weekly oil inventory report out today at 10:30am ET, so that news could potentially give a lift (or a further whack). If USO gets back to $65 after that report, I’d just exit the balance of the put spreads.

After having had a pretty good string of winners, we’ve now run into the opposite. This happens in trading, and do not let it discourage you. It’s all part of the game, as well as a good lesson to not let your ego get the best of you after a string of wins. Mr. Market is notorious for taking back what he giveth.

Partial Closing Trade

• MDT – 345.31% Gain: Sell to Close 2 Contracts (or 50% of your remaining Contracts) May 19th $82.50 Calls @ $8.55 Credit. DailyPlay Portfolio: By Closing 2 of the 4 remaining Contracts, we will receive $1,701
• IEF – 26.09% Gain: Buy to Close 12 Contracts (or 1/3 of your Contracts) May 19th $99/$100 Call Vertical Spreads @ $0.34 Debit. DailyPlay Portfolio: By Closing 12 of the 34 Contracts, we will be paying $408.

Investment Rationale

Price meandered yesterday but then a mild decline late in the day took the SPX into a minor loss of 2 points. No harm; no foul, as they say. I’m not expecting much to happen until Wednesday’s Fed meeting, so much of what is really being done is really just traders and PMs paring some of their positions before the rate announcement and subsequent press conference afterwards. I tend to me more in the camp that we see a 25 bp. hike on Wednesday and then possibly another one in June. Then a pause – not one that means anything more than that they won’t raise again unless/if the data that comes over the summer suggests that they still need to tighten things up.  I would not take it to mean that their job is done.

Looking at our open portfolio positions, let’s take 2 of 4 MDT calls off today. Price has stalled at the bullish Propulsion Momentum Level of $91.70, and why not lock in some more of the 345% we’re up on this trade. Any daily close beneath $89.57 and we’ll exit the final two calls.

MDT – Weekly

Our IEF short call trade is up 26% in just two days with yesterday’s 12 bp. rally in the TNX. We have 34 of these bearish call spreads on, so let’s take 12 of them off today to lock some quick profit and reduce the trade before tomorrow’s FOMC announcement.

Yesterday MCK got whacked for a 2.8% loss (the stock fell over $10 to $354) and makes our short $370/$380 call spread a little more secure (with 18 days till expiration). If today or tomorrow trades down to the $348.75/.25 area, exit 1 of 3 remaining spreads.

We’ll see what today brings and clean up things a bit more tomorrow to get done before the FOMC announcement. Lastly, I spoke with Tony yesterday and he wants to keep on his short AAPL trade into its earnings report which comes out Thursday after the close.

USO Bullish Opening Trade Signal

View USO Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 16 Contracts June 2nd $67/$65 Put Vertical Spreads @ $0.74 Credit per contract.

Total Risk: This trade has a max risk of $2,016 (16 Contracts x $126) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $126 to select the # contracts for your portfolio.

Counter Trend Signal: This ETF is currently neutral but expected to trade higher over the duration of this trade.

1M/6M Trends: Neutral/Neutral

Technical Score: 3/10

OptionsPlay Score: 88

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

We finally saw the SPX close above its weekly cloud top on Friday, as did the SPY and the S&P futures. This doesn’t make me bullish, per se, but from a risk management perspective does make me less bearish, and it did take us out of the long SPY put trade on last Friday’s close (as previously written as our buy-stop).

I still see lots of issues going forward – the obvious and the not so obvious.  For instance, if you take away the performance of the 7 biggest SPX names, there’d be very little reason to be an equity market bull. Breadth is poor, and frankly, the SPX is up 19.5% from the October low while the far broader and more “average stock” Russell 2000 index is down 7%. Since the Feb. ’23 peak, the SPX is flat and the Russell is down 11.7%. That’s not exactly a bull market environment.

Here’s a monthly chart of the SPY/IWM. There’s resistance around here, and should this chart start heading lower, it’s not particularly bullish, too. (The weekly chart of this pair comes in on a Combo +12 from last week, too.)

SPY/IWM – Monthly

So, the main point I’m making is that the likelihood of a mega bull market kicking in here on the SPX cloud chart breakout last week is just not likely.

For a new trade idea, let’s play for a bounce in crude oil after a potential trading bottom was made last week. As calls are way too pricey (yes, even with a VIX at 16, this is a commodity-related ETF and not your typical stock), we can receive very close to our standard desired credit intake of 40% by selling the USO June 2nd $67/$65 put spread. (I’m seeing USO decline by about $0.50 on Sunday night right to $67, so based upon Friday seeing where the $67.50/$65.50 theoretical value was, it collected 39% of the strike differential.)

USO – Daily

IEF Bearish Opening Trade Signal

View IEF Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 34 Contracts May 19th $99/$100 Call Vertical Spreads @ $0.42 Credit per contract.

Total Risk: This trade has a max risk of $2,006 (34 Contracts x $59) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $59 to select the # contracts for your portfolio.

Counter Trend Signal: This stock is bullish and is expected to pull back from a level of resistance.

1M/6M Trends: Neutral/Bullish

Technical Score: 6/10

OptionsPlay Score: 91

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

Stocks surged on Thursday after solid big cap tech results on Wednesday after the bell, and then Amazon beating last after yesterday’s close has certainly given tech a nice run to end a month that they’ve underperformed by about 200 bps. going into the last day of April. Furthermore, today certainly sets itself up to be a day that could finally see the SPX close above the 4155 level, and potentially force many shorts to run for the hills next week.

Yesterday we covered 2 of 6 short SPY spreads to lock in some profit. By the end of the day, the other four turned into a losing position given the 2% gain in the market. We’ll exit the other four late in the day today should the SPX and SPY be trading above their weekly cloud tops going into the close.

We’re up 382% on the four remaining MDT calls we own. If the stock isn’t trading above $91.70 going into today’s close, we’ll take one more contract off then.

Lastly, here’s a new idea that is pure tactical trading and simply leaning on a resistance level with a tight stop. Consider shorting the May 19th IEF $99/$100 call spread. It went out yesterday at $0.415 mid, representing us collecting ~41% of the strike differential. Should the IEF close any day above the recent high point of $100.78, we exit.

IEF – Weekly

Closing Trade

• BROS – 87.18% Gain: Buy to Close 1 Contract (or 100% of your remaining Contracts) April 28th $30/$28 Put Vertical Spread @ $0.10 Debit. DailyPlay Portfolio: By Closing the last Contract, we will be paying $10. We took partial profit when we closed 1 Contract on April 25 @ $0.10 Debit, on April 17 when we closed 2 Contracts @ $0.28 Debit, on April 13 when we closed 5 Contracts @ $0.30 Debit, on April 12 when we closed 3 Contracts @ $0.28 Debit and on April 4 when we closed 4 Contracts @ $0.48 Debit. Our average cost basis to exit this trade is therefore $0.31 Debit and our average gain on this trade is 59.78%.

Partial Closing Trade

• SPY – 64.94% Gain: Sell to Close 2 Contracts (or 1/3 of your Contracts) May 12th $411/$395 Put Vertical Spreads @ $5.74 Credit. DailyPlay Portfolio: By Closing 2 of the 6 Contracts, we will receive $1,148.

Investment Rationale

Yesterday was an interesting session, as several key markets turned around from how they started the day (some then even flipped the flips around). To witness, the SPX gapped higher but closed down almost 40 bps. The TNX opened a few bps. higher; then sold off to take out yesterday’s low; and then rallied to close up above their open. Bitcoin futures opened about $700 higher; then significantly rallied to a gain of as much as $2400; but the settled up only $300. That’s some funky trading.

Futures are decently higher after earnings reports. Today there’s still a slew of earnings coming out both before the open and after the close, including Amazon’s. Things will quiet down a bit tomorrow after several of the biggest tech names having reported.

Today we’ll take off our last BROS short puts spread. It’s up 87% and we basically got long at the bottom of the stock’s move, and have scaled out since.

Yesterday, we also sold out of half of our long GILD call spread and took a quick loss on that partial exit. Wednesday’s low came right at its weekly Base Line, so perhaps it can bounce from here and continue upward as I had expected it to.

Our SPY put trade is up ~65%. Let’s take 2 of 6 off today.

EBAY reported yesterday after the close; the stock is trading up about 2.25% this morning. IF going into today’s close the stock is above its bullish Propulsion Momentum level of $44.21, we’ll then sell a June 2nd $44/$41 put spread. It went out yesterday at $1.19, or 40% of the strike differential.

EBAY – Daily

CSX Bearish Opening Trade Signal

View CSX Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 34 Contracts May 26th $31/$29 Put Vertical Spreads @ $0.58 Debit per contract.

Total Risk: This trade has a max risk of $1,972 (34 Contracts x $58) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $58 to select the # contracts for your portfolio.

Counter Trend Signal: This stock is bullish and is expected to pull back as it has reached a point of exhaustion.

1M/6M Trends: Bullish/Bullish

Technical Score: 8/10

OptionsPlay Score: 141

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

Investors didn’t take kindly to First Republic’s news on Tuesday, and along with some earnings disappointments before the open, the SPX sold off 65 points (1.58%) to close at 4072, the lowest close since March 30th. With the general theme I’ve espoused of “Do what worked in the past (until it doesn’t)”, we’ve substantially lightened overall long exposure over the past two weeks, as the significant SPX resistance at 4148/4155 continues to cap the rallies.

However, after the close we got some big tech earnings beats, so as I write this Tuesday evening, I see S&P futures up ~ 18 points from where they closed at 5pm.

There is still much to move the market over the balance of the week, with both economic releases and lots more earnings reports. As I mentioned earlier this week, yesterday through tomorrow has 35% of all SPX companies reporting, so even if we think we know which way the market is going to move based upon where it is now, the reality is that we still could see a rally that hurdles 4155 by Friday. At this point, it’s all data dependent because there really isn’t an overall trend to lean on.

A few portfolio notes/changes:

1. Yesterday I wrote that if any day this week we see MDT trade above $90.50, we’d take another long call off the table. It did that yesterday with an intraday high of $91.00, so if you sold it around when the stock hit $90.50 you exited that contract at about $8.30. (We’re long from $1.92.) That now cuts us down to still holding 4 contracts, with those remaining ones up 322%.
2. On Monday, we went long a GILD call spread. We have plenty of time on these, but IF it is trading today beneath $85.47 (the channel line it broke out from) going into the close, I then want to get out of 4 of 8 long spreads on the close to minimize a loss on what could turn out to be a bearish evening star pattern.
3. We have on 1 last short BROS $30/$28 put spread that expires on Friday. IF today is trading lower on the day going into the closing bell, we will exit that last spread we have on. Otherwise, we will get out of it tomorrow morning.

GILD – Daily

Finally, here’s a new bearish play in one of the big Dow Transport names:  CSX. For the 4th time since last August, it has stalled right at either the bottom or top of its weekly cloud. It did it again a week ago, so let’s look to buy the May 26th $31/$29 put spread. Yesterday it went out at 57.5 cents, or about 29% of its strike differential. Any Friday close above $32.5 will stop us out of this trade.

CSX – Weekly

Partial Closing Trade

• BROS – 87.18% Gain: Buy to Close 1 Contract (or 50% of your remaining Contracts) April 28th $30/$28 Put Vertical Spread @ $0.10 Debit. DailyPlay Portfolio: By Closing 1 of the 2 Contracts, we will be paying $10.

Investment Rationale

A fairly insignificant day for stocks on Monday, as the SPX added but 3.5 pts. to 4137 as investors wait for a whopping 35% of all S&P 500 companies reporting earnings today through Thursday (including several mega-cap tech names). These three days could finally create the impetus for a breakout move higher or a several percent move down if we see disappointing results.  We’re all anxiously waiting for something to happen to get us out of the choppy range funk we’ve been in this year.

In our portfolio, we still have on 2 short BROS $30/$28 put spread that expires this Friday. The stock closed yesterday at $31.42. We’re up 87% on these, so let’s kick out one of these today. And should today go into the close with the stock trading under $30.05, we’ll sell the other one on the close.

BROS – Daily

We’re also short 3 MCK May 19th $370/$380 put spreads. With the stock at just shy of $362, we’re up 23% (although it feels like we should be up more). But earnings come out on May 8th, and until that report is out of the way, we’re not going to see the vol component of the spread price really come in. Considering the stock has not properly broken beneath its bearish Propulsion Momentum level at $358.68, let’s cover one of those 3 spreads today IF the stock is trading above that level going into today’s close.

MCK – Daily

Our long MDT call trade has been a homerun, now up 303% on the remaining 5 contracts. (We took 5 off yesterday.) On any day this week that the stock first trades above $90.50, we’ll take off another one contract.

MDT – Daily