Partial Closing Trades

• NEE -43.15% Gain: Buy to Close 2 Contracts Nov. 18th $77.50/$82.50 Call Verticals @ $1.12 Debit. DailyPlay Portfolio: By Closing the 2 of the 6 Contracts, we will be paying $224. 
• SLV -161.76% Gain: Sell to Close 12 Contracts Nov. 18th $18.50/$17 Put Verticals @ $0.89 Credit. DailyPlay Portfolio: By Closing 12 of the 36 Contracts, we will be receiving $1,068.
• SRE -315.91% Gain: Sell to Close 1 Contract Oct. 21st $165/$145 Put Vertical @ $18.30 Credit. DailyPlay Portfolio: By Closing the 1 of the remaining 2 Contracts, we will be receiving $1,830. Please note that our target price range of $136 – $135 was not hit yesterday. This trade is therefore for those that did not close out the remaining 2 SRE Contracts yesterday.

Investment Rationale

Yesterday’s intraday turnaround was significant, but not entirely unexpected given our prior call for a mid-October bounce that would likely give markets a lift into Election Day. I’ve had good-till-cancelled bids in the SPY for my own account at the equivalent of my downside SPX target of 3465—3435.  Unfortunately, I missed getting filled yesterday at my desired entry level, but there is a point to this: Have resting bids at where you want to be a buyer, because in real-time it’s a lot harder deciding in a market dive where to be a buyer. Have your buy/sell levels established before the market gets there.

Thursday’s action would appear to have completed Wave 3 of Wave III, despite it not quite having hit my downside target. It will make me look to be a buyer on a pullback into yesterday’s intraday support levels that you can determine by looking at where volume hardly traded yesterday on any name that you are looking to bid on. Those low-traded volume levels often end up being support.

There are several position adjustments I suggest you do today:

Make sure you are out of the TLT trade that expires today
Let’s take 2 of 6 short NEE Nov. 6th $77.50/$82.50 call spreads. We’re up 43% on them so far.
Let’s take off 12 of 36 SLV Nov 18th $18.5/$17 put spreads we have on. (We’re up 162% on them so far.)
Yesterday I recommended removing the final 2 SRE Oct. 21st $165/$145 put spreads if we sold down to $136 – $135 over the next several days. Thursday’s low got down to $136.54 and then it exploded higher to close at $143.03. Let’s take off one of two remaining spreads today after that type rejection of our target.

SRE – Daily

Closing Trades

• TLT – 48.74% Loss: Buy to Close 1 Contract Oct. 14th $102/$98 Put Verticals @ $1.77 Debit. DailyPlay Portfolio: By Closing the remaining 1 of the original 6 Contracts, we will be paying $177. We took partial profits for this trade on August 19 at a $2.74 Debit by closing 3 Contracts, and then again on October 12 at $1.98 Debit by closing 2 Contacts. Therefore, the average gain on this trade is 2.16% and the average cost basis to exit this trade is $2.33 Debit.
• SRE – 323.86% Gain: Sell to Close 2 Contracts Oct. 21st $165/$145 Put Verticals @ $18.65 Credit. DailyPlay Portfolio: By Closing the remaining 2 of the original 5 Contracts, we will be receiving $3,730. We took partial profits for this trade on September 27 at a $7.75 Credit by closing 1 Contract, and then on September 28 at a $9.95 Credit by closing 1 Contract, and then again on September 30 at a $11.65 Credit when we closed 1 Contract. Therefore, the average gain on this trade is 202.95% and the average cost basis to exit this trade is $13.33 Credit. Please note that we will be waiting for our target price of $136 – $135 to be hit before we close this trade, so the profitability as well as the cost basis will differ somewhat from what we list here.

Investment Rationale

Stocks traded in a fairly narrow range yesterday, waiting for the FOMC minutes, which when they came out, did nothing material to the market. That puts the key earnings coming out today and tomorrow as the main catalyst for how stocks will trade the next two days – and possibly well after that.

In the meantime, the SPX is right by the 2022 lows made earlier this week. Many are looking for the growing number of daily Sequential -13s to indicate a rally is coming. I’m not pressing the downside bets hear and now, but will look for clues for the next 100- to 150-point move to try to take advantage of. I’m still thinking that we can see the mid-3400s trade this month, but it’s getting harder to play for an ~ 120-pt. downmove when we’d now need risk more than that on the upside. 

Tomorrow the last remaining 1 spread we have on in TLT expire. Make sure you are out of them today.

Also, we have 2 remaining long put spreads in SRE that expire in 8 days. We’ve got a huge win on this trade, with these final two spreads trading at about 4x the price we paid for them. Should we see a move to the $136 to $135 take place in the next few trading days, we’ll exit the balance of the trade at the then current mid-price of the Oct. 21st $165/$145 put spread as it fills the gap area I have on the below chart.

SRE – Daily

Partcial Closing Trade

• TLT -66.39% Loss: Buy to Close 2 Contracts Oct. 14th $102/$98 Put Verticals @ $1.98 Debit. DailyPlay Portfolio: By Closing 2 of the remaining 4 Contracts, we will be paying $396.

NFLX Bearish Opening Trade

View NFLX Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 3 Contracts Nov. 18th $205/$180 Put Vertical Spreads @ $8.35 Debit.

Total Risk: This trade has a max risk of $2,505 (3 Contracts x $835).

Trend Continuation Signal: This is a Bearish trade on a stock that is experiencing a bearish trend. 

1M/6M Trends: Bearish/Bearish

Technical Score: 3/10

OptionsPlay Score: 125

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note these prices are based on the previous day’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. This will be reflected in the Portfolio tab within the OptionsPlay platform.

Investment Rationale

As equities trade near new relative lows going into new earnings season, all eyes turn to Q3 corporate earnings for how 2022 will end. With the banks reporting this week, we will get a glimpse into the health of the US economy. Looking ahead into next week’s big earnings week, one name stands out to me as a potential bearish opportunity. After 2 disastrous back to back earnings, all things have been quiet on the NFLX front. After an attempt to base and trade higher into the $200’s, Netflix’s outlook has not improved and at risk of a pullback into the $100’s. Currently trading at 20x next year’s earnings estimate (which I feel is still very optimistic) is a hefty premium after seeing a 10% decline in earnings for 2022. Trading at 16x would target $175 to the downside. Additionally, the weekly cloud model shows NFLX just broke below its conversion line after finding support above it in July. This leads me to believe that the base formed above $225 has been broken and NFLX will likely head back towards its previous lows of $170.

I’m looking to buy the Nov $205/$180 Put Vertical @ $8.35 Debit for a bearish earnings play.

NFLX – Weekly

NEE Bearish Opening Trade

View NEE Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 6 Contracts Nov. 18th $77.50/$82.50 Call Vertical Spreads @ $1.97 Credit.

Total Risk: This trade has a max risk of $1,818 (6 Contracts x $303).

Trend Continuation Signal: This is a Bearish trade on a stock that is experiencing a bearish trend. 

1M/6M Trends: Bearish/Bearish

Technical Score: 6/10

OptionsPlay Score: 106

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note these prices are based on the previous day’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. This will be reflected in the Portfolio tab within the OptionsPlay platform.

Investment Rationale

Stocks traded back and forth in a range on Monday, taking out both overnight highs and lows of where S&P futures traded. The SPX declined 75 bps. to 3612, less than 30 pts. from the recent 2022 low. (As I mentioned I would do in yesterday’s morning webinar, I did kick out the S&P futures at the same price I had bought them at on Sunday night (3634), as I didn’t see any reason to keep them into today. The market remains heavy and, in my view, headed downward to my mid-3400 target, where I will likely start to replace some of SPYs that I sold out of earlier this year.

A new recommendation for today is to enter a bearish bet on Nextera Energy.  After seeing five failures this year north of the upper-$80s – three of which were accompanied by Setup +9s – I think this still has room to the downside to near $70. So, let’s look to short an NEE November 18th $77.50/$82.50 call spread for what closed yesterday at $1.975 mid, collecting just about 40% of the spread.

NEE – Weekly

Partial Closing Trade

DHR -18.11% Loss: Buy to Close 1 Contract Oct. 21st $265/$282.5 Call Vertical @ $7.50 Debit. DailyPlay Portfolio: By Closing 1 of the 2 Contracts, we will be paying $750.

Investment Rationale

Bulls will tell you that last week was a gain of 1.5% and that the bottom is in. I disagree. The SPX gave back ~80% of last week’s early gains, and it still remains in a downward Setup count (coming into this week on a -7). I suspect there are still good odds that we see a move down to the mid-3400s this month, and then we might see a decent trading bounce into elections (and possibly through them depending upon how successful Republicans are at gaining House and Senate seats.

Tactically, the SPX is down into the support area that we were hoping for early last week to get a chance to buy into. Tactical bulls can look to buy now, with a stop under the 2022 low (~2% lower than Friday’s close). It’s not a crazy thing to do from a pure trading stance, but don’t look for last week’s high to be taken out.

This week has both FOMC Minutes (on Wednesday, but with no new rate decision or press conference), and key PPI and CPI figures on Wednesday and Thursday, respectively. Expect them to move markets, along with the kickoff of a new earnings reports from Taiwan Semi and key financial institutions later in the week.

We have a short DHR Oct. 21st $265/$282.5 call spread that closed on Friday at $268ish and should open lower today based upon futures down 36 as I write this Sunday night. Today, let’s take off 1 of the 2 spreads we have on.

Investment Rationale

Today is one of the more important trading days of the month, with the Sept. jobs numbers coming out at 8:30am ET. Given yesterday’s decline of 1%, some must already be expecting a bad number and sold in advance. A well-higher than expected number (consensus is about 250K jobs created) could send the week’s gains away by the close. (Maybe even by the open.) On the flip side, bulls are hoping for a lower than expected number with what I believe is a false hope that the Fed will change their course at all come next Wednesday’s FOMC statement.

As you probably have already figured, given the unknown news of the day – along with a weekly option expiration – I am not putting out a new DP today. It’s just too hard to guess what price action will be with both 8:30 and then 10am (i.e., Wholesale Inventories) economic reports coming.

With this past Monday’s weekly market outlook webinar; yesterday’s Institutional Mindset webinar, and then this morning’s open Q&A session that I am hosting at 8:45am, you will have heard enough from Rick for a while. (And heck, I’m back Monday morning again, too.)  I’ve been clear in my thoughts:  I see virtually no chance that the Fed is going to pivot just weeks after its chairman made it very clear what they need to do, regardless of the “pain felt to individuals or businesses”. He drew the line in the sand. He’s not crossing it anytime in the near future.

So, maybe the market still has some legs to it. I hope so. It would still give us an opportunity to lighten exposure before 2023 earnings numbers get lowered, which will virtually force the market lower to more closely match what will be new PE ratios. 

– Rick Bensignor
Chief Market Strategist

Partial Closing Trade

• TLT -19.33% Gain: Buy to Close 2 Contracts Oct. 14th $102/$98 Put Verticals @ $0.96 Debit. DailyPlay Portfolio: By Closing 2 of the 6 Contracts, we will be paying $192.

Investment Rationale

Stocks pulled back on Wednesday, but nothing like I think it should have given the rather significant rally in the DXY (+0.9%). Is this telling us just how bullish investors have turned this week, or was it also related to lighter volumes because of Yom Kippur? I’m not sure, but I suspect we’ll have the answer by Friday after seeing the reaction to the new employment/non- farm payrolls numbers that could easily influence the Fed’s upcoming rate decision next week.

Monday’s daily SPX Sequential -13 that, by chance, came at the 200-WMA gave bulls all they needed to come back with a buying spree, pushing the SPX up 6% in a couple of days. In fact, I’m hoping that today is another higher close day, because if tomorrow’s jobs numbers come in higher than expected, you could see the market give back 100+ SPX handles even before the NYSE opens. (For those of you who trade the pre-open, you want to be ready to make a trading decision as soon as those 8:30am ET numbers get released.)

In the meantime, I want to adjust one of the trades I’ve recently recommended: We are short 6 TLT Oct 14. $102/$98 put spreads. Let’s take 2 of these off today. (Personally, I’d probably do one in the morning and one near the close.)

The DHR short call spread has now rallied to right near the upper “hedge” strike we have on (the $282.50 area). As that is a level I purposely chose as I knew it to be important resistance, I don’t want to take off the trade now until it proves itself up through there. So, we’ll wait until after tomorrow’s numbers come out to see if we exit or not.

Join me at 4:15pm ET today for one of OP’s great educational webinars that I’ll be doing on how to develop and master an “Institutional Mindset”. 

SLV Bearish Opening Trade

View SLV Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 36 Contracts Nov. 18th $18.50/$17 Put Vertical Spreads @ $0.34 Debit.

Total Risk: This trade has a max risk of $1,224 (36 Contracts x $34).

Counter Trend Signal: This is a Bearish trade on a stock that is experiencing a bullish trend. 

1M/6M Trends: Bullish/Mildly Bullish

Technical Score: 8/10

OptionsPlay Score: 123

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note these prices are based on the previous day’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. This will be reflected in the Portfolio tab within the OptionsPlay platform.

Investment Rationale

With the strength of the US Dollar, gold and silver have broken below their key support levels. After breaking the major $20 support level in early May and collapsing to $16, the pullback in the US Dollar this week has Silver rallying to levels just shy of this key $20 resistance level. Given the macro headwinds of a slowing global economy and persistent dollar strength, the risks skew to the downside. Moreover, this rally puts silver a full 2 standard deviations above its 40 period moving average, generating a short signal. We are targeting a return back towards its Sept lows by purchasing a Nov $19/$17 Put vertical for a $0.55 Debit.

SLV – Daily

SPY Bullish Opening Trade

View SPY Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 10 Contracts Oct. 14th $362/365 Put Vertical Spreads @ $1.13 Credit.

Total Risk: This trade has a max risk of $1,870 (10 Contracts x $187).

Counter Trend Signal: This is a Bullish trade on a stock that is experiencing a bearish trend. 

1M/6M Trends: Bearish/ Bearish

Technical Score: 5/10

OptionsPlay Score: 87

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note these prices are based on the previous day’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. This will be reflected in the Portfolio tab within the OptionsPlay platform.

Investment Rationale

Yesterday’s rally didn’t come out of nowhere.  It came from Friday’s new 2022 lows that were done at end of month/end of quarter/and an expiration day. It also came on a daily Sequential -12 signal, upping the odds quite a bit that Monday would be a -13 count (which it was, and the first daily standard Sequential -13 reading since May 12 – almost five months ago).

SPX – Daily

The first question to ask oneself – after seeing a rip higher like we did yesterday – is “Has anything changed the bigger story?” And the answer to that question was found in looking at the charts showing the dollar’s rally further falling beneath the 112.63 target we’ve had, and bond yields continuing their pullback from last week’s 4% high. Those two non-equity markets – that have so much to do with how equities have traded this year – both gave reasons to be buying yesterday. Or at the very least, suggesting one not press the overall bearish bet at that place and time.

The second question is how much duration does a potential rally have? Was this a one day affair, with today going to give it all back like what happened last Wednesday and Thursday? Does it last a few days? A week? A month That, of course, is the bigger and more important question to decipher. To me, that answer can only come by also seeing what rates and the greenback do going forward, for their inverse relationship to the stock market is still quite prevalent and will likely be so through year’s end.

Right now, the dollar has hit an important target and halted – at least for now. The bonds hit an important target and halted – at least for now. The SPX hit its 200-WMA and saw but a one day breach of the June lows and halted its decline – at least for now. So, watch for any of these two non-equity benchmarks to continue their declines or to properly break above them and you’ll likely have the direction the stock market will go. At least for now.

I’ve looked closely into Monday’s SPY price action and have determined that if a pullback is going to hold, the SPY should not get lower than the $364.50 to $362 zone. Use that as a potential bullish area to buy today or tomorrow on an intra-day decline. So, turning this into an actual trade idea, let’s sell the short-dated October 14th SPY $365/$362 put spread when/if we see a pullback into this zone. (On Monday this spread closed at $1.14, but it will be higher when/if we get filled.)

I’d suggest you do this trade with more than one entry price, rather than picking the midpoint (i.e., just in case it doesn’t get to $363.50). So put some on near each of those 4 whole dollar levels to try to get an average entry at $363.50, but having something on should it, let’s say, only pullback to $364 (in which case you’d still have some partial bullish exposure on).

If I’m right that sometime in October we’re going to see the SPX mid-3400s trade, I don’t want to go out to any further expiration date for a bullish play from the current SPX level (which is now some 200 points higher than that target zone).

Closing Trades

• HLT – 87.65% Gain: Sell to Close 4 Contracts October 21, 2022 $135/$125 Put Verticals @ $7.60 Credit. DailyPlay Portfolio: By Closing the remaining 4 of 8 Contracts, we will be receiving $3, 040. We took partial profit for this trade on September 22 at $6.30 Credit by closing half of the positions. Our average cost basis to exit the trade is, therefore, $6.95 Credit and the average gain is 71.61%.
• ARKK – 62.87% Loss: Sell to Close 8 Contracts November 18, 2022 $45/$54 Call Verticals @ $1.01 Credit. DailyPlay Portfolio: By Closing all 8 Contracts, we will be receiving $808. 

Partial Closing Trades

SRE -164.77% Gain: Sell to Close 1 Contract Oct. 21st $165/$145 Put Vertical @ $11.65 Credit. DailyPlay Portfolio: By Closing 1 of the remaining 3 Contracts, we will be receiving $1,165.

AAPL Bearish Opening Trade

View AAPL Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 1 Contract Nov. 11^th $145/$157.5 Call Vertical Spread @ $4.65 Credit.

Total Risk: This trade has a max risk of $785 (1 Contract x $785).

Trend Continuation Signal: This is a Bearish trade on a stock that is experiencing a bearish trend. 

1M/6M Trends: Bearish/ Bearish

Technical Score: 5/10

OptionsPlay Score: 105

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on the previous day’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. This will be reflected in the Portfolio tab within the OptionsPlay platform.

Investment Rationale

Stocks gave back Wednesday’s large gain (and more), and gave agata to all bulls who boasted that “the double bottom is in”.  ell… nope. At least not yet. Today is end of month and quarter, so it’d be no surprise to see some major swings in price. Even if we see a rally off of the DeMark -13s in many, many names, I don’t think the bounce gets materially above the 3819 level – the properly broken weekly TDST Line that previously had not been properly broken on the late-Spring decline to the June low. (It should now present resistance.)

As mentioned in yesterday’s post-close webinar Tony and I hosted, we are going to look to sell an upside call spread in Apple, with our belief that it will likely test its 2022 low area (if not further) in the fall. As such, we will look to put on a half-position today (i.e., 1% risk of a theoretical $100K size account vs. the normal 2% we risk on most trades) by selling the Nov. 11th $145/$157.5 call spread, collecting a $4.65 credit, or ~38% of the spread differential (that was $2.5 OTM as of Thursday’s close). That’s how much AAPL vol is juiced up right now.

AAPL – Weekly

Today, we also want to close out our remaining 4 HLT Oct. 21^st $135/$125 put spreads.

I will also take off one more of our long SRE Oct. 21 $165/$145 put spreads, bringing us down to now holding 2 of the original 5 spreads. This one is up 165% as of yesterday’s close.

And don’t forget that we can still look to enter yesterday’s TLT idea if it pulls back to the $102.50/$101.50 level by putting on the Oct. 14th $102/$98 put spread.

So, lots to do today. Have a good weekend.