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$BDX, $VRTX, $ADI, $DAL, $XLC

DailyPlay – Partial Closing Trades (BDX, VRTX, ADI) Closing Trades (DAL, XLC) – August 2, 2022

Partial Closing Trades

Closing Trades

  • DAL – 53.46% Gain: Sell to Close 6 Contracts Aug 19, 2022 $30/$35 Call Verticals @ $2.44 Credit. DailyPlay Portfolio: By closing the remaining 6 of the 12 Contracts, we will be receiving $2,928. We took partial profits for this trade on July 21 at a $2.73 Credit. Therefore, the average gain on this trade was 62.58 % and the average cost basis to exit this trade is $2.59 Credit.
  • XLC – 31.67% Loss: Buy to Close 5 Contracts Aug 5, 2022 $55/$61 Call Verticals @ $2.37 Debit. DailyPlay Portfolio: By closing all of the 15 Contracts, we will be paying $1,185. Note: this was a conditional trade that was closed for a profit at 10am this morning, when the condition described below was met.

Investment Rationale

Equities saw a mild sell-off yesterday, and not something unexpected by me given that Friday’s rally closed right on resistance levels in both the SPY and QQQ.  Was this but a one-day decline, or will we see some more? I suspect we’ll see a bit more before another more significant rally occurs over the coming weeks leading into the Jackson Hole meeting that investors will keenly focus on later this month. Between now and then, earnings and interest rates will most likely be the day-to-day driving force behind the market’s moves.

With just 4 trading days to go to expiration of our short August 5th BDX $237.50/$230 put spread, and the stock has closed at $244.71 yesterday, I see a daily Setup +9 count that also shows an overbought MACD move, along with the past 5 days in a row of roughly the same high. That is surely enough for me to take off 2 of the 4 contracts we have on this morning (generally, I don’t usually trade options before 9:50am ET earliest to get past less savvy retail investors’ orders). Moreover, should today also head into the last 20 mins. of trading at a price beneath Friday’s low of $242.02, then we’ll also kick out the remaining 2 contracts by the close.

BDX – Daily

We’re also short an August 5th XLC $55/$61 call spread, so we’re running out of time for this to work. The stock closed yesterday at $56.29, so we’re well within striking distance of the $55 becoming out of the money for the call buyer by then. But with little time left, let’s put a bid in at the same $1.80 we originally shorted it for to potentially wash the trade in the next day or two. If we don’t get filled, we’ll exit on Thursday to avoid being exercised.

XLC – Daily

$UBER

DailyPlay – Opening Trade (UBER) – August 1, 2022

Bullish Opening Trade Signal

View UBER Trade

Strategy Deta

Strategy: Short Put

Direction: Bullish

Details: Sell to Open 1 Contract Aug 19, 2022 $22.50 Put @ $124 Credit.

Total Risk: This trade has a max risk of $2,130 (1 Contract x $2,130 per contract).

Trend Continuation Signal: This is a Bullish trade on a stock that is experiencing a bullish trend. 

1M/6M Trends: Bullish/Neutral

Technical Score: 2/10

OptionsPlay Score: N/A

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

By looking at the UBER chart, we can see a primary downtrend since February 2021. Over the last few months, we saw a bottom coming in as an inverted head-and-shoulders formed, and this targets about $28 to the upside which we could see on the earnings catalyst. Another factor to consider for a bullish trade is the comparison between UBER and its biggest rival, LYFT. LYFT’s revenue growth has been half of what we see in UBER. More interesting is the rich Implied Volatility as we are going into earnings. Right now the market is implying a +- 12% move versus the historical average of only +- 5.3% over the last 8 quarters. What we will be doing is to harvest this Implied Volatility by Selling a naked Put option. 

UBER Daily

$TAN, $DE

DailyPlay Partial Closing Trade (TAN) Closing Trade (DE) July 29, 2022

Partial Closing Trade

Closing Trade

Investment Rationale

We’ve just reviewed all open DP positions in our morning webinar. Two charts make me want to adjust positioning:

We are short 3 TAN Aug. 12th $70.5/$61 put spread. With the stock now on a daily +13 and against the stop-out level from a prior +13, let’s take one of the three spreads off today to lock in a 90% profit on that contract.

TAN – Daily

We are short 2 Aug. 12th DE $295/$315 call spread. We’ve lost the same amount equal to the premium we collected, and there’s less than a 10% chance this comes back to work out. Thus, let’s just take our loss before it gets worse and exit this spread today.

DE – Daily

DailyPlay Update – July 29, 2022

Investors have looked extremely favorably at Fed Chair Powell’s remarks from his press conference earlier this week, and have continued on a rampant buying spree to add a 1.2% SPX gain yesterday onto Wednesday’s over 2% gain. With Amazon and Apple providing good numbers after yesterday’s close, I see S&P futures already up near 4100 as I write this Thursday evening.  That’s some 450 pts. (or about 12.5%) higher than the intraday low marked just six weeks ago.

Though I strongly believe that this rally will lead to an upcoming solid selling opportunity, for now, it’s another summer Friday and let’s look to see if today finishes strong or sees profit-taking.

Enjoy your weekend.

– Rick Bensignor
Chief Market Strategist

$CRM

DailyPlay – Opening Trade (CRM) – July 28, 2022

Bullish Opening Trade Signal

View CRM Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 2 Contracts Sept 2, 2022 $175/$160 Put Verticals @ $4.38 Credit.

Total Risk: This trade has a max risk of $2,124 (2 Contracts x $1,062 per contract).

Trend Continuation Signal: This is a Bullish trade on a stock that is experiencing a bullish trend. 

1M/6M Trends: Bullish/Neutral

Technical Score: 4/10

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. 

Investment Rationale

The FED has spoken, and although they raised rates by the expected 75 bps., investors were pleased with what Chairman Powell said to ease fears that the economy is not in trouble, moving ever more so dovish-ly as his press conference went on. By the day’s end, the SPX added 2.6% and the Nasdaq a whopping 4%.

As I said in an interview on Tuesday with IG TV in Europe (here’s the link: https://www.ig.com/uk/market-insight-articles/beat-the-street–pre-us-market-open-live-show-220726)

To me, the more the market now rallies, the more the Fed will feel comfortable raising rates later this year. And as such, it would imply that stocks can eventually fall under the pressure of those higher rates, which would also likely lead to more layoffs and the consumer having a more difficult time paying for things than they even have now. If that were to come along with gas prices getting back over $5 – and possibly heading even higher than that (it recently reached over $10/gallon equivalent in the UK) – the Fall could see “The Fall” in equity prices that make new 2022 lows.

But in the meantime, I have been near-term bullish, having suggested that the SPX’s four weeks in a row with roughly the same low (starting the week after the 2022 low was made) was enough to start a move higher – along with now a second week in a row closing above the weekly cloud model’s Conversion Line (another piece of the puzzle I said would be needed to improve the bullish picture). 

As such, let’s look to sell a Salesforce (CRM) Sept. 2nd $175/$160 put spread (yesterday the mid- price closed at $4.38).  This gives us some breathing room if we see some pullback from Wednesday’s large gains (the stock closed at $180.30), but I’m thinking this could run up to its Base Line (in orange), currently near $194+.

CRM – Weekly

$ACN, $DE, UAL

DailyPlay – Closing Trade (ACN) Partial Closing Trades (DE, UAL) – July 27, 2022

Closing Trade

  • ACN -60.53% Gain: Buy to Close 1 Contract July 29, 2022 $280/$270 Put Verticals @ $1.50 Debit. DailyPlay Portfolio: By closing the remaining 1 of 2 Contracts, we will be paying $150. We took partial profits for this trade on July 19 at a $3.80 Debit. Therefore, the average loss on this trade was –1.32% and the average cost basis to exit this trade is $2.65 Debit.

Partial Closing Trades

Investment Rationale

Right off the bat, today is Fed Day, so we will not be putting on a new trade today: it would be a complete crap-shoot of which way to play the market’s reaction to whatever news comes from both the 2pm FOMC release, as well as Chairman Powell’s remarks at the 2:30pm press conference. Thanks, but no thanks.

However, we do have some positions on that we can make adjustments to.  Let’s start with our short ACN July 29 $280/$270 put spread. This expires in three days, and the stock closed on Tuesday at $285.18. We only have 1 contract on, so let’s take our ~60% profit on it and be out before Fed time.

Secondly, we have on a short DE $295/$315 call spread expiring in 17 days.  Price is above the upper strike (i.e., the “hedge” level) and we’re down more than 50% on it. So, let’s remove 1 of the 2 spread contracts we have today.

Lastly, we’re long a UAL August 19th $38/$47 call spread. The stock closed at $35.34 yesterday, and we’re down 68% on it. If after the 2 pm Fed news the stocks is trading (or trades) below this week’s low of $35.19, sell out of 3 of the 6 spreads we are long.

The market is pricing in a 75 bp. raise in rates today. I’d think it would come in at that level, but even if it does, it’s all about the language/tone of the statement, as well as what Powell says afterward that players will most key off of.

$KR

DailyPlay – Opening Trade (KR) – July 26, 2022

Bearish Opening Trade Signal

View KR Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 28 Contracts Aug 12, 2022 $45/$44 Put Verticals @ $0.32 Credit.

Total Risk: This trade has a max risk of $1,904 (28 Contracts x $68 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: 90

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 we will be entering this trade later today, between 3:30 pm and 3:55 pm, as we are expecting the stock to open lower today.

Investment Rationale

With the FOMC meeting results due on Wednesday afternoon, I’m not expecting a significant market move before then, barring some brand new news coming out that can alter the game. Nonetheless, today and Wednesday still have a slew of earnings reports out that can push individual stocks to double-digit gains or losses depending upon results / guidance relative to Street expectations.

However, if you want to step into the market to do something, let’s use the likely strong weakness we will see today in Consumer Staples (after Walmart again missed their earnings report last night) to sell a short-dated August 12th Kroger (KR) $45/$44 put spread. KR reports on Aug. 12th, so we will be out of this before that report comes out. When we look at its daily chart, we see a perfected Setup -9 count from yesterday (clearly it will trade lower today, so we won’t put this trade on until late in the day today), but it is also nearing three prior daily TDST support lines all right near $44 (i.e., I know that I do not want to be long if those give way).

So, after today’s likely Staples drubbing, we’ll sell this put spread sometime between 3:30 and 3:55pm and look for this to hold into this $45-$44 support area until its earnings come out in 17 days.

KR Daily

$AAPL

DailyPlay – Opening Trade (AAPL) – July 25, 2022

Bearish Opening Trade Signal

View AAPL Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 3 Contracts Aug 26, 2022 $155/$165 Call Verticals @ $3.91 Credit.

Total Risk: This trade has a max risk of $1,827 (3 Contracts x $609 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: 8/10

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

It is now time to short AAPL as we are going into earnings next week. When we look at the long-term chart of AAPL, we see a channel wherein AAPL was trading higher over the last few years. As this trend-line has been broken to the downside, we are seeing a retest of this channel. The risk/reward favors the downside as we are going into earnings. On the long-term chart, we can also see a head-and-shoulders formation. Looking at the Daily chart, we see that APPL has approached a shorter time-frame resistance level as well.

AAPL Daily

DailyPlay Updates – July 22, 2022

Another summer Friday is upon us, which means even less liquidity than the diminished bid/offer size we’ve already regularly seen for months. It’s not a good day for an institutional portfolio manager to put on a large trade.

Tech should be under strong pressure today with SNAP missing their earnings report and seeing the stock fall 25% quickly in after-hours trading, while META fell 5% in sympathy. But even if we end the week poorly, we are now seeing dip buyers, so that may balance out some bad reports’ negative effects on overall price action.

In the bigger picture, the SPX’s weekly cloud’s Lagging Line continues to be the most reliable indicator of SPX direction, and while it still remains above the bottom of its cloud, there is a near-term bullish bias. But I will tell you – well in advance of it potentially happening – that I still will be looking to sell into market strength (probably in the 4200—4300 level). And maybe even in a large way.  I am not at all convinced that the 2022 low at 3637 stays the low this year. 

SPX – Weekly

I think the macro picture is still a major issue, and that this current rally is more about over-zealous bearish positioning at the wrong time (meaning too much selling had come in since the low was made. The shorts need to get squeezed out before the market can likely take another leg lower.)

Also, keep an eye on the US Dollar.  It is stalling against a monthly TDST Line at 107.31 that it has already gone above and back below on an intra-month basis. If the greenback fades, stocks get a tailwind for its rally, as dollar strength in 2022 continues to hamper equity price advancement.

Enjoy your weekend.

– Rick Bensignor
Chief Market Strategist

$ADI

DailyPlay – Opening Trade (ADI) Closing Trade (JNJ) Partial Closing Trade (DAL) – July 21, 2022

Closing Trade

JNJ – 54.90% Loss: Sell to Close 3 Contracts Sept 16, 2022 $175/$190 Call Verticals @ $2.81 Credit. DailyPlay Portfolio: By closing all 3 Contracts, we will be receiving $843.

Partial Closing Trade

DAL – 71.70% Gain: Sell to Close 6 Contracts Aug 19, 2022 $30/$35 Call Verticals @ $2.73 Credit. DailyPlay Portfolio: By closing 6 of the 12 Contracts, we will be receiving $1,638.

Bearish Opening Trade Signal

View ADI Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 3 Contracts Aug 26, 2022 $165/$175 Call Verticals @ $3.90 Credit.

Total Risk: This trade has a max risk of $1,830 (3 Contracts x $610 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: 9/10

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 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

We have seen an incredible amount of strength from semis these past couple of weeks as the market finds a temporary bottom. However, that does not change the overall underperformance of the sector and my preference is to seek short exposure on this strength. There is one name that jumps out as a potential opportunity to fade this strength. I’m looking at Analog Devices (ADI) which printed a daily +9 count.

Additionally, we are approaching a prior resistance area around $167.50, which also corresponds with the weekly cloud bottom. To fade this rally, I’m going to sell a call credit spread, using the Aug 26 $165/175 Call Vertical for a $3.90 Credit (39% of vertical width).

ADI – Daily

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