Closing Trades

AAPL – 144.90% Loss: Buy to Close 3 Contracts Aug 26, 2022 $155/$165 Call Verticals @ $9.60 Debit. DailyPlay Portfolio: By closing all 3 Contracts, we will be paying $2,880. 

HD – 60.19% Loss: Sell to Close 3 Contracts Sept 16, 2022 $310/$285 Put Verticals @ $2.52 Credit. DailyPlay Portfolio: By closing all 3 Contracts, we will be receiving $756. 

Bearish Opening Trade Signal

View BEAM Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 8 Contracts Sept 16, 2022 $60/$50 Put Verticals @ $2.45 Debit.

Total Risk: his trade has a max risk of $1,960 (8 Contracts x $245 per contract).

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: 3/10

OptionsPlay Score: 157

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

Another up day for stocks, as the bulls can’t seemingly get their hands on enough shares to keep them satiated; they just come back each day for more. And we’re really happy about that, as we’ve been bullish the market since July and have been capturing the upmove. That being said, you know that I am very gingerly starting to get less bullish over time, and will be using the following month or so to reduce my equity exposure, using a combination of selling covered calls, shorting futures, shorting SPY and/or QQQ, and simply selling out of certain of my personal holdings as I see individual names reach targets that I am happy to say “au revoir” to after having held many of them for years.

For a new trading idea for today, let’s look at one of the top 10 weighted holdings in Cathy Woods’ ARKK fund, Beam Therapeutics (BEAM). The name has less than three years of price history, and like many names in her flagship fund, was decimated earlier this year, but rebounded nicely since its bottom in May. But here’s the thing about its recent price action: it has gone nowhere in the past month while the market has zoomed upward.

Looking at the weekly chart, we see a Setup -9 one week before this year’s low, and now an opposite Setup +9 one week before its recent high last week. This makes it a significant underperformer this summer, and a candidate for lower prices on any corporate-specific negative news or just the whole market coming off.

BEAM – Weekly

The daily chart shows an Aggressive Sequential -13 one day before this year’s low, and a +13 one day after the rally’s high (just a few days ago).

BEAM – Daily

Put this data altogether, and we have a reason to now be bearish the name. As such, we are going to buy a BEAM September 16th $60/$50 put spread for $2.45 (based on Tuesday’s closing mid prices). The cost represents just 25% of the strike differential (but realize that it is also out of the money by ~ $3.50).

Bullish Opening Trade Signal

View HD Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 3 Contracts Sept 16, 2022 $310/$285 Put Verticals @ $6.33 Debit.

Total Risk: This trade has a max risk of $1,899 (3 Contracts x $633 per contract).

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: 4/10

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

Today’s DailyPlay trade is Home Depot (HD). We have seen a fair amount of decrease in the construction industry, which we expect to reflect in the earnings for HD this week. The stock has already declined by 30% since its peak, and lately, it had a significant bounce higher, but it is currently trading at a key level of $315. This level used to be a key support level, which has now turned into a key resistance level. When we look at the Relative Performance chart, we can see that HD is aiming toward the downside relative to its sector, which is an indication that fewer buyers are stepping in and that some buyers are getting out of their positions. The Home Construction numbers for June were lower than expected and we, therefore, believe that HD will trend lower after the earnings announcements this week. Finally, HD is currently trading at about 18 X next year’s earnings which are above the average of 14 X compared to its main competitor’s lows. 

HD – Daily

Partial Closing Trade

TLT -109.85% Gain: Sell to Close 6 Contracts Aug 26, 2022 $118.50/$114.50 Put Verticals @ $2.77 Credit. DailyPlay Portfolio: By closing 6 of 12 Contracts, we will be receiving $1,662

Closing Trades

USO -40.00% Gain: Buy to Close 1 Contract Aug 12, 2022 $73/$83 Call Verticals @ $1.83 Debit. DailyPlay Portfolio: By closing the remaining 1 of 3 Contracts, we will be paying $183. We took partial profits for this trade on August 5 and then again on August 9. Therefore, the average gain on this trade is roughly 42% and the average cost basis to exit this trade is $1.76 Debit.

Bullish Opening Trade Signal

View VALE Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 70 Contracts Sept 2, 2022 $13.50/$14.50 Call Verticals @ $0.27 Debit.

Total Risk: This trade has a max risk of $1,890 (70 Contracts x $27 per contract).

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

1M/6M Trends: Mildly Bullish/Bearish

Technical Score: 3/10

OptionsPlay Score: 171

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 zoomed higher again on Wednesday, fueled by what investors took as a softened inflation outlook. The SPX crossed above 4200, and is getting closer to the area (4270+) where I will likely start to fade the rally. We’re starting to see a real shift higher in bullish sentiment, and the more I hear people say, “You can’t be short”, the more I will look to find the places that we can be. Fading moves takes patience, so I haven’t been in a hurry to do that. In fact, I’ve consistently said that there was more upside likely coming – and it has. Thus, things are looking like they are playing out the way I was anticipating they would. We’ll see if today’s PPI report leads to more buying.

Turning towards our short USO $73/$83 that expires tomorrow, yesterday’s oil inventory report was a well higher stockpile build than expected, and oil should have had a decent selloff. However, it got dragged higher by “Risk-On” buyers, and the corresponding USO ETF closed at $74.32. Make sure you close out the last contract we still have on sometime today.

USO – Daily

I’m also looking to get into a long VALE Sept. 2^nd $13.5/$14.5 call spread. If we’re going to see a final squeeze on the shorts in beaten-down names (this is a copper-related one), then this should also see an upward thrust that takes out the naysayers. This spread costs $0.27 (so 27% of the spread differential), and is already in-the-money by 26 cents, so I look at it as a relatively cheap option to play for that upside over the next three-plus weeks.

VALE – Daily

Closing Trades

• UBER – 98.39% Gain: Buy to Close 1 Contract Aug 19, 2022 $22.50 Put @ $0.02 Debit. DailyPlay Portfolio: By closing 1 Contract, we will be paying $2. Initially, we only opened 1 Contract, which we are now closing.
• VRTX – 24.61% Loss: Buy to Close 1 Contract Aug 19, 2022 $290/$310 Call Verticals @ $9.47 Debit. DailyPlay Portfolio: By closing the remaining 1 of 2 Contracts, we will be paying $947. We took partial profits for this trade on August 2 at a $2.73 Debit. Therefore, the average gain on this trade is 23.55 % and the average cost basis to exit this trade is $5.81 Debit.

Partial Closing Trade

• CRM -18.49% Gain: Buy to Close 1 Contract Sept 2, 2022 $175/$160 Put Verticals @ $3.57 Debit. DailyPlay Portfolio: By closing 1 of the 2 Contracts, we will be paying $357.

Bullish Opening Trade Signal

View NEM Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 12 Contracts Sept 16, 2022 $45/$50 Call Verticals @ $1.61 Debit.

Total Risk: This trade has a max risk of $1,932 (12 Contracts x $161 per contract).

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

1M/6M Trends: Bearish/Bearish

Technical Score: 2/10

OptionsPlay Score: 118

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 took a minor breather yesterday as tech names were hit hardest after Micron disappointed investors. The SPX is still up against general resistance in the 4150 neighborhood, and less bullish traders are taking some profits on recent purchases.

For today’s DP, I noticed that Newmont Goldcorp (NEM) now has a weekly Setup -9 count that is also in the vicinity of its 6-yr. uptrend line from the secular lows in late-2015. As such, and with the VIX near its lows for most of this year, we’ll look to buy a NEM Sept. 16th $45/$50 call spread. Yesterday, this went out at $1.92, and has a very reasonable cost of just 26% of the strike differential.

If the VIX had been nearer 30 (than the current sub-22), I’d really prefer to play this by selling a $45/$37.5 put spread, but there’s just no juice in selling most options right now.

NEM – Weekly

We’re also short two CRM Sept. 2nd $175/$160 put spreads. The stock has stalled right at resistance and yesterday broke beneath its near-term uptrend line.  Let’s remove one of those two contracts today.

CRM – Daily

Let’s also close out our short UBER August 19th $22.5 put. We’ve taken out almost the entire value of what we collected (~98%) and with a Setup +9 count against prior TDST resistance, there’s just no reason not to run with what we already have made.

UBER – Daily

Lastly, let’s close out of our short 1 contract of the VRTX August 19th $290/$310 call spread. We’re down about 25%, but with it having reported earnings last week and beaten estimates, we run the risk that this goes up to that $310 area. (When I can, I like taking small losses.)

VRTX – Weekly

Partial Closing Trades

• USO – 44.26% Gain: Buy to Close 1 Contract Aug 12, 2022 $73/$83 Call Verticals @ $1.70 Debit. DailyPlay Portfolio: By closing 1 of the 3 Contracts, we will be paying $170. We closed the 1st of 3 contracts on August 5th and have 1 contract remaining.
• KR – 83.87% Gain: Buy to Close 28 Contracts Aug 12, 2022 $45/$44 Put Verticals @ $0.05 Debit. DailyPlay Portfolio: By closing all 28 Contracts, we will be paying $140.

Investment Rationale

Monday saw but a 12 bps. loss for the SPX, despite some lousy earnings reports out that, could have made for a far worse loss than the 5 pt. drop. So, again, we are seeing a market get bearish news, but not sell-off. That usually means that there is still more upside room to go, as trapped shorts from lower levels are simply not given a chance to get out anything near breakeven. Short squeezes can be and are often vicious.

Today we will take off one of the two remaining USO short $73/$83 spread contracts we have that expire this Friday. Last week we took off the first of three, and with the USO going out on Monday at $73.54, it’s just too close to the $73 strike to do much else with it. (As a reminder, every Wednesday at 10:30am ET the oil market gets the weekly API inventory report. It’s basically the biggest news driver for the oil market each week.) So, tomorrow’s number will determine if that last contract we have on will be a winner or loser. (If you are not comfortable in taking that “gamble” to play that news, then feel free to exit the trade today.  We’ve made money in it.)

USO – Daily

We’re also short an August 5^th XLC $55/$61 call spread, so we’re running out of time for this to work. The We also have a short KR $45/$44 put spread that expires Friday, with 28 contracts on. With that position up 84% with just a few days to go, let’s take off 10 of the contracts today.

KR – Daily

Bullish Opening Trade Signal

View INTC Trade

Strategy Details

Strategy: Long Call Diagonal Spread

Direction: Bullish

Details: Buy to Open 3 Contracts (Buy Jan 20, 2023 $35) / (Sell Sept 9, 2022 $38) Call Diagonals @ $3.10 Debit.

Total Risk: This trade has a max risk of $1,866 (3 Contracts x $622 per contract).

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

1M/6M Trends: Bearish/Bearish

Technical Score: 2/10

OptionsPlay Score: 112

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. Finally, the Risk for this trade is not Unlimited, but $622 per contract.

Investment Rationale

With INTC currently trading at a long-term support level of $35, we expect some market memory to come into play here. This is the price level from where INTC broke higher in 2017, and has now retraced towards. With regards to the sentiment on this stock, 26% of analysts have a BUY rating, they don’t expect EPS and revenue growth until 2024 and they have reached peak bearish sentiment. Therefore, the sentiment on the street is seen as overly bearish which leads us to take a contrarian stand on this stock. We will therefore be taking some Long exposure.

INTC – Daily

It’s another summer Friday. Boy, do they come quickly. But to most of us, we’re glad to see the rally last that started last Wednesday when the Fed again raised rates. Despite several Fed governors telling us earlier this week that they were not done tightening – the very opposite of the supposed reason behind the equity market’s rally – they’ve continued to edge higher.

So, when you think it through, there clearly was some other reason that stocks have not sold off after the clarification of the Fed still needs to push yields higher. If it’s as simple as I suggested yesterday – that the bearish positioning was so strong that two weeks ago’s rally is pushing to a five-week high and also seeing price extend up above the weekly Conversion Line – then this rally is more than halfway done. (Bear market rallies can be vicious.) However, if it’s the real McCoy (i.e. If this is real buying largely fueled by new money coming into the market (rather than shorts bidding up stocks to cover bad positions) then any pullback to support needs to be bought.

I’m definitely in the camp of the former and think that when we see most convinced that new 2022 highs will come later this year – then, and only then, will I really play for a down move that potentially comes lethally and swiftly – for there will be few to no shorts left to cushion the decline, and few buyers to bid for stocks they already bought higher.

In the meantime, the SPX has reached an obvious resistance level in the 4150 +/- 1% area where we saw it previously break down from. Let’s see what today brings with oil still tailing off and whether there will be continued enthusiasm that inflation has peaked. 

And lastly, start planning on what you will do if the market continues higher.  Buy more? Thankfully sell? Or just hold (and deal with the future ups and downs at a later time)?  

Though oil has finally gone our way with just a week to go before the expiration of our short Aug. 12th USO $73/$83 call spread, let’s take off one of the three contracts we have on to lock some profit. The daily chart posted a Sequential -13 on Wednesday, so better safe than sorry.

USO – Daily

Enjoy your weekend.

– Rick Bensignor
Chief Market Strategist

Bullish Opening Trade Signal

View T Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 30 Contracts Sept 2, 2022 $18.50/$17.50 Put Verticals @ $0.31 Credit.

Total Risk: This trade has a max risk of $2,070 (30 Contracts x $69 per contract).

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: 80

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. 

Investment Rationale

Bulls and squeezed bears continue to push stocks higher, even with Fed officials contradicting investors’ beliefs that they were “pivoting” to a more dovish view. (I told you immediately after last week’s Powell press conference that they were not, and that the Street had that interpretation wrong.)  Nonetheless, the market continues to rip, and has significantly gained since the FOMC rate adjustment last Wednesday.

Something is amiss, given that the “No, we’re not done” statements didn’t undo the rally. In theory, it should have more than Tuesday’s one-day decline. Which means one very important thing to me: Bearish positioning was so strong that not even bad news can get the market down enough to give the shorts an out, leading me to think that we still need to do more upside squeezing before the market can actually fall again

Today, I’m looking at putting on a bullish play in a beaten down, unloved name: AT&T (T). Its weekly chart shows it still holding above its uptrend line; support from prior highs; and, by chance, now also shows its first daily Sequential -13 downside exhaustion signal of the year.

• You could simply choose to buy the stock outright.
• You could choose to buy a call spread.
• You could choose to sell an at-the-money or slightly in-the-money put
• You could choose to sell a put spread.

I’m not going to lay out each and every one of those idea’s trade parameters, but I’ll simply lay out selling a September 2nd $18.50/$17.50 put spread for what yesterday closed at $0.305. You’re collecting ~31% of the strike differential, and if exercised you’re essentially buying the stock at about $18.20, a bit lower than it is now.

T – Daily

Bearish Opening Trade Signal

View TLT Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 12 Contracts Aug 26, 2022 $118.50/$114.50 Put Verticals @ $1.72 Debit.

Total Risk: This trade has a max risk of $2,064 (12 Contracts x $172 per contract).

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

1M/6M Trends: Bullish/Neutral

Technical Score: 4/10

OptionsPlay Score: 107

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 this is a CONDITIONAL TRADE. See the Condition below. The strike prices, premiums, and OptionsPlay Score will therefore be slightly different when the condition is met, and we enter this trade.

Investment Rationale

I’ve recently been telling you that the TLT needs to get Friday closes above $119.42 to potentially create a bigger breakout to $130+. But yesterday’s multiple Fed governor statements that the Fed is “not” done raising rates – something I’ve been saying since last week – along with the UST 10yr. bouncing on the weekly Base Line at 2.58% (to yesterday’s close at 2.74%), makes me think that rates will actually head towards 3% in the near term.  If so, we will look to fade the 6-week-long TLT rally.

THE CONDITIONAL TRADE: IF the TLT trades (anytime today or during the rest of this week) up to $118.50 to $119.00, we’ll then look to buy an August 26^th $118.50/$114.50 put vertical at the then current mid-price of the spread, playing for the TLT to lose value to break its uptrend line and sell down into the $114 area.

TLT – Daily