HLT Bearish Trade Idea

View HLT Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 8 Contracts October 21, 2022 $135/$125 Put Vertical Spreads @ $2.67 Debit.

Total Risk: This trade has a max risk of $2,136 (8 Contracts x $267).

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

1M/6M Trends: Bullish/Mildly Bullish

Technical Score: 6/10

OptionsPlay Score: 150

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 the equity market continues a grind higher into resistance levels, we are starting to take a look at bearish opportunities in consumer names that are showing signs of exhaustion and underperformance. HLT has been a name that has stuck out with an unreasonably premium valuation relative to its peers, while starting to shows signs of exhaustion after a near 30% rally from the June lows. Additionally, it is trading up against the weekly cloud bottom and base line which converge at $138 forming a strong level of resistance. Coupled with the Daily Setup +13 count that we printed on yesterday, I’m looking for a reversal lower back towards the $120’s.

 Buy to Open HLT Oct 21 $135/$125 Put Vertical @ $2.68 Debit.

HLT – Weekly

Closing Trades

• HSY – 55.92% Gain: Buy to Close 2 Contracts October 7, 2022 $230/$240 Call Vertical Spreads @ $1.75 Debit. DailyPlay Portfolio: By Closing 2 of the 3 Contracts, we will be paying $350. 
• XLF – 85.29% Gain: Buy to Close 30 Contracts September 16, 2022 $33/$32 Put Vertical Spreads @ $0.05 Debit. DailyPlay Portfolio: By Closing all 30 Contracts, we will be paying $150. 
• NEM – 86.96% Loss: Sell to Close 6 Contracts Sept 16, 2022 $45/$50 Call Verticals @ $0.21 Credit. DailyPlay Portfolio: By Closing the remaining 6 of the 12 Contracts, we will be receiving $126. We took partial profits for this trade on September 2 at a $0.14 Credit. Therefore, the average loss on this trade is 89.13% and the average cost basis to exit this trade is $0.18 Credit.

Investment Rationale

After a small rally last week, markets will likely continue higher to test the major resistance area of $4106-$4283 with opportunities to seek bearish exposure on any further strength. Gold and Bonds remain just above a major support level and Bitcoin near a major resistance level. Look for breaks of these key levels in the coming weeks for large potential opportunities. We are using this time to reduce long exposure and take profits on short positions that are near take profit levels.

SPX – Daily

View UNG Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 14 Contracts October 21, 2022 $27/$24 Put Vertical Spreads @ $1.48 Credit.

Total Risk: This trade has a max risk of $2,128 (14 Contracts x $152).

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

1M/6M Trends: Mildly Bearish/Bullish

Technical Score: 1010

OptionsPlay Score: 108

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

Before the market open on Monday, Rick laid out a bearish tactical case for Natural Gas given the excessive bullishness from traders despite a bullish longer-term view. With Natural gas now over 21% lower in 2 weeks and 12% in the past 4 trading sessions, I see an opportunity to play for a neutral bounce. This also coincides with a -9 Setup on the Daily Chart and the Daily Cloud top acting as a level of support for natural gas. Additionally, the elevated implied volatility on this selloff provides an opportunity to harvest volatility by selling a Put Vertical for nearly 50% of the vertical width.

Sell to Open Oct 21 $27/$24 Put Vertical @ $1.48 Credit.

UNG – Daily

Closing Trade

• USO – 89.57% Loss: Sell to Close 8 Contracts Sept 16, 2022 $75/$81 Call Verticals @ $0.24 Credit. DailyPlay Portfolio: By Closing all 8 Contracts, we will be receiving $192. 

Trade Adjustment

• INTC – 64.19% Unrealized Loss. Roll the Sept 9 $38 Call to the Oct $35 Call @ $0.24 Credit
• Buy to close Sep 9, $38 Call @ $0.01 Debit (originally opened at $0.45 credit)
• Sell to open Oct 21, $35 Call @ $0.25 Credit
• This results in a reduced premium for the INTC Long Call Diagonal Trade to $2.86 ($3.10 – $0.24)

Investment Rationale

Bulls managed to muster the most strength that we’ve seen in a few weeks yesterday. We closed just above the top of the Daily Cloud and we will see bulls can push higher today into the 4050-4100 resistance area (conversion and base line), otherwise, we could see a retest of the 3900 support (cloud bottom) and a potential break towards 3700. Any further strength would be an opportunity to seek additional bearish exposure. Until then we will take this opportunity to reduce some of our long exposure in USO on weakening demand outlook and adjusting our INTC diagonal as we approach the expiration of the short strike.

Close the Full USO Position @ $0.24 Debit

Roll the Sept 9 $38 Call to the Oct $35 Call @ $0.24 Credit

S&P500 Index

View XOM Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 6 Contracts September 23, 2022 $95/$100 Call Vertical Spreads @ $1.99 Credit.

Total Risk: This trade has a max risk of $1,806 (6 Contracts x $301).

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

1M/6M Trends: Bullish/Bullish

Technical Score: 1010

OptionsPlay Score: 103

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

After what appeared to be a day that we could have seen upward prices from how futures traded overnight, yesterday saw those gains evaporate to close lower on the day. Again, we’re getting a sense that the market can’t hold rallies, and in many ways, it’s acting the opposite of how the SPX traded in 2021, when it could barely hold losses.

With crude oil looking more and more like its weekly cloud is going to pose overhead resistance going forward, let’s look to short a XOM Sept. 23nrd $95/$100 call spread for what closed yesterday at $2.07 mid. (The higher “hedge” strike would be at a new closing high for the post-July rally.)

XOM – Daily

As a reminder, today is my last OP activity until I return from vacation on Monday, Sept. 18th. Tony will handle all the Daily Plays and webinars for me until then.

Partial Closing Trade

• NEM -91.30% Loss: Sell to Close 6 Contracts Sept 16, 2022 $45/$50 Call Verticals @ $0.14 Credit. DailyPlay Portfolio: By Closing 6 of the 12 Contracts, we will be receiving $84. 

Investment Rationale

Stocks made a midday rebound and were able to hold on with a day-ending rally to finish Thursday with a gain for the SPX, NDX and DIA. The SPX bounced on its uptrend line from the June low, as well as a TDST Line at 3921. Given the recent rejection of the downtrend line from all-time highs and the bounce today on the uptrend line from the 2022 low, perhaps we get a little reprieve today and next week. However, I do believe that rallies are still meant to sell into, as nothing new has yet changed the bigger macro fundamentals that are not in favor of a general bull market.

Today is the last Friday of the true summer season, and with markets closed in the US on Monday, I’m not apt to want to buy an option today, and not willing to be a seller down here, either. So, it’s like most summer Fridays where we watch and make little tweaks as needed to our overall portfolios.

I do think that we need lighten up on our long NEM Sept. 16th $45/$50 call spread. I’ve held off reducing until now because of the daily chart marking a -13 signal on Tuesday, but with price falling beneath NEM’s uptrend line on breakout dollar strength, gold and gold-related names are under deep pressure. Let’s take half off today.

NEM – Daily

Bearish Opening Trade Signal

View ICLN Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 30 Contracts October 21, 2022 $22/$20 Put Vertical Spreads @ $0.63 Debit.

Total Risk: This trade has a max risk of $1,890 (30 Contracts x $63).

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

1M/6M Trends: Neutral/Bullish

Technical Score: 10/10

OptionsPlay Score: 135

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

Equities are failing to hold any attempt of gains. In fact, I am seeing a pattern along these lines: 

1. Asia rallies
2. The US tries to hold those gains on the NY open
3. Europe closes (11:30 NY time) and then it’s sell, sell, sell

That’s not atypical for a bearish market mode.

S&P futures are down some 20 pts. (3936) as I write this Wednesday evening. The bounce I was hoping to see from SPX 4050/4023 has not materialized. The goal was to again be a seller – this time anything near 4125. It’s looking less and less like that’s in the cards.

Looking for stocks/ETFs that are showing failing rallies, I see the iShares Global Clean Energy ETF (ICLN) potentially fitting the bill. It topped right at the Risk Level ($23.83) from the daily +13 Combo upside exhaustion signal, and has traded off since then. Given the large unfilled gap that this could easily fill on continued market weakness, let’s look to buy a ICLN October 21st $22/$20 put spread for what closed yesterday at $0.625 mid.  That represents 31% of the spread differential, making for a possible max. profit of $1.375.

ICLN – Daily

Investment Rationale

Stocks got hit yesterday, seeing all overnight gains in futures disappear, as housing data came in weaker than expected, and the Consumer Confidence and JOLT jobs number came in better than expected – the latter two looked at bearishly by investors as it helps show the Fed that they can continue to slow the economy by raising rates further. After the second session of seeing early futures markets rally fade, I sold out of my S&P futures long at the same price (4024) I got in at on Monday.  And I’m glad I did, because it saved me today’s downdraft.

Today is the last trading day of August, and Friday – for all practical purposes – the last trading day of the summer. We can still see some increased volatility from both of those “endings”, and with this week the heavily vacationed one it is, don’t be surprised to see some big intraday swings, too. 

Today the SPX and SPY will more than likely post daily Setup -9 count s– always a possible trading bounce point. (The NDX and QQQ marked the -9 count yesterday.) Both of these two major US indexes are also near their respective weekly support levels I laid out on Monday (so maybe by Friday’s close those weekly support levels hold for a trading bounce?) However, I still think the big picture is a negative one, and that rallies should be sold into to lighten overall equity market exposure. (It would take a substantial change in known fundamentals to alter my view.)

In the meantime, we still have to deal with this Friday’s expiration in our long VALE $13.5/$14.5 call spread. Yesterday, we sold out of 15 of the 45 we still had on, and today we will sell out of the remaining 30. (Until yesterday, price hadn’t materially moved against us, but Tuesday’s 4.7% loss makes it very unlikely for price to get back above $13.50 by Friday’s close. It’s up to you, as always, should you wish to hold off and hope for Friday to get that upmove for you to then exercise the call to buy the stock.)

VALE – Daily

A reminder that we have educational webinars today at 4:15pm ET with Jess, Tony, and me, and then Friday morning a Members Only open Q&A session with me at 8:45am ET.

Closing Trade

• T -109.68% Loss: Buy to Close 30 Contracts Sept 2, 2022 $18.50/$17.50 Put Verticals @ $0.65 Debit. DailyPlay Portfolio: By Closing all 30 Contracts, we will be paying $1,950. 

Partial Closing Trades

• VALE – 48.15% Loss: Sell to Close 15 Contracts Sept 2, 2022 $13.50/$14.50 Call Verticals @ $0.14 Credit. DailyPlay Portfolio: By Closing 15 Contracts, we will be receiving $210. We Partially Closed this trade on August 23 at $0.13 Credit, when we Closed 25 of the 70 Contracts, leaving us with 30 Open Contracts.
• INTC – 34.52% Loss: Sell to Close 1 Contract (Buy Jan 20, 2023 $35) / (Sell Sept 9, 2022 $38) Call Diagonals @ $2.03 Credit. DailyPlay Portfolio: By Closing 1 of the 3 Contracts, we will be receiving $203. 
• BEAM – 113.06% Gain: Sell to Close 2 Contracts Sept 16, 2022 $60/$50 Put Verticals @ $5.22 Credit. DailyPlay Portfolio: By Closing the remaining 2 Contracts, we will be receiving $1,044. We took Partial Profit on this trade on August 18 at $4.30 Credit, when we Closed 4 of the 8 Contracts, and then again, on August 23 at $6.47 Credit, when we closed 2 of the remaining 4 Contracts. Therefore, the average gain on this trade is 107.04% and the average cost basis to exit this trade is $5.07 Credit.

Investment Rationale

The SPX reached my near-term tactical support zone (4032/4023, where three unrelated technical indicators came together) and was the projected initial down move target from when I turned bearish north of 4270. I can’t make much out of yesterday’s action other than there was clearly some buying in there to offset selling from those stuck long from higher levels. Yesterday I bought some S&P futures in the fund I trade for at 4024. I’m gonna keep a tight sell stop on them but still think we could see a trading bounce this week from the confluence of three unrelated indicators (all near 4030) I explained in Monday’s OP webinar.

We see the market on a daily Setup -7 count coming into today, so we may very well see a terminal -9 count by Wednesday, but the bigger picture is what really matters. And we may get a better clue into that depending upon where Wednesday closes because the monthly chart (below) has a new look to it with the +13 count that came in because of where the August rally had reached. Closing beneath the Base Line (3960) is potentially another negative, while closing above 4132 would kill the down count and potentially make the picture less negative.

SPX – Monthly

As far as our Daily Play portfolio, let’s look at the short T Sept. 2nd $18.50/$17.50 put spread we have on. We are down 110% of what we collected, and with support having given way the past few days and yesterday also gapping lower and then closing beneath the -13’s Risk Level ($17.83), let’s cover our put spread today – half this morning and half nearing today’s close.

T – Daily

We’re long 45 VALE Sept. 2^nd $13.5/$14.5 call spreads. The market hasn’t really gone against us on this one, but time has. We’ve only got four days for this to work.  Let’s exit another 15 of the spreads today.

VALE – Daily

We are also long three INTC Sept. 9th $35 calls vs. short 3 Jan. 20th $38 calls. The Sept. calls expire in 11 days, and we’re down about 35% on the position, so let’s remove 1 of the three spreads we have on now.

INTC – Daily

Lastly, we have the remaining two long BEAM $60/$50 put spreads expiring Sept. 16th.  This was a recent large winner. With price against the cloud top, and my thoughts that we may still get a general market trading bounce, let’s take off the last two to lock in what was a 113% winner as of yesterday.

BEAM – Daily

Bearish Opening Trade Signal

View HSY Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 3 Contracts October 7, 2022 $230/$240 Call Vertical Spreads @ $3.97 Credit.

Total Risk: This trade has a max risk of $1,809 (3 Contracts x $603).

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

1M/6M Trends: Bullish/Bullish

Technical Score: 9/10

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

As HSY fails to break higher above its $230 prior all-time highs and starts to show some signs of exhaustion, this warns us of a potential pullback. It is hard to bet against a stock with such strong relative strength and an uncanny ability to navigate the supply chain issues, but it is not immune to a slowdown in consumer spending. Currently trading above 28x next year’s earnings, it is at a substantial premium to its peers despite only expecting 12% EPS growth for next year. I see this valuation at risk of multiple contraction as we’ve seen across the entire market. 

HSY – Daily