Taking Profits

• CLF: 80% Gain: Buy to close Mar 18, 2022 $14/$16 Put Vertical @ $0.14 Debit. 

CLF has reached a daily Setup +9 count and is now by its 100- and 200-DMAs. We have collected the bulk of the premium, and now that earnings are out of the way, the only real downside risk we now have is basic market risk. However, even though chances are good that we would reap the full credit amount we took in, we will officially exit the trade now and close the remainder of the position. 

Please note, that half of this position was closed on Feb 4 at $0.35 Debit. Therefore, the average price of closing the entire position is ($0.35 + $0.14)/2 = $0.25. 

Rick Bensignor

Chief Market Strategist

Adjusting Trade

• FDX: 36% Loss: Roll short leg (Feb 25, 2022 $270 Call) as follows:
  • Buy to close Feb 25, 2022 $270 Call for $0.18 Debit. 
  • Sell to open Mar 4, 2022 $260 Call for $0.87 Credit.

This reduces the cost basis of the overall FDX position from $14.46 to  $13.77. By selling OTM calls against the long FDX call, we are consistently reducing the cost basis to provide a better breakeven price. Please note that this is not an open signal for the FDX Call Diagonal Trade, this signal should only be used if you are already in the FDX trade that was opened on December 28th, 2021.

SHW Bullish Opening Trade Signal

Strategy Details:

Strategy: Put Credit Spread

Strategy Direction: Bullish

Details: Sell March 18, 2022 $290/$270 Put Vertical @ $7.00 Credit Limit Order

Counter Trend Signal: This is a bullish strategy on a stock that is experiencing a bearish trend. 

1M/6M Trends: Bearish/Bearish

Technical Score: 4/10

OptionsPlay Score: 83

View SHW Trade

Entering the Trade

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

Investment Rationale

SHW has sold down sharply this year but is starting to find support just above the medium-term support zone shown on its accompanying chart. It marked an Aggressive Sequential -13 “downside exhaustion” signal earlier this week, and is already on a -11 towards a -13 on the Standard Sequential count. Selling this put spread, time passing as this bases is to our advantage, and with the stock already having reported earnings this quarter, there should be no major downside catalyst. We think it bases and moves higher from this general area.

Strategy Details

Strategy: Call Debit Spread

Strategy Direction: Bullish

Details: Buy Feb 28, 2022 $370/$380 Call Vertical @ $2.09 Debit Limit Order

Counter Trend Signal: This is a bullish strategy on a ETF that is experiencing a bearish trend. 

1M/6M Trends: Bearish/Bearish

Technical Score: 6/10

OptionsPlay Score: 99

View QQQ Trade

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

With the QQQ having made 4 consecutive daily lows against its cloud model’s Conversion Line (in pink), we’re going to play for a move up to test last week’s high near the Base Line (in orange), where there should be some short-term resistance. The cloud’s Lagging Line (in bold blue) is nothing more than the current price displayed 26 days in the past, so that blue line tracks wherever the QQQ is trading in real-time. That Lagging Line should face resistance when/if it rallies up to its cloud bottom at $380 anytime in the next three weeks. Therefore, we will buy a Feb. 28 $370/$380 call spread. When price hits its Base Line (currently $359.12), we will unwind half the debit spread. Our sell-stop will be any day (or two days; your choice) that now closes beneath last Friday’s low of $351.97.

Closing Trades

• KMI – 4.41% Gain: Long Mar 18, 2022 $16/$18 Put Verticals​ @ $0.71 Credit
• MRK – 50% Loss: Short Mar 18, 2022 $75/$80 Put Verticals​ @ $2.58 Debit

DailyPlay Positions Outlook

Equities continue to consolidate at current levels with SPY and QQQ ending the day in the red. However, key levels continue to be maintained. Despite the short-term outperformance of growth relative to value, yesterday saw value gain some momentum to continue its recent uptrend relative to growth. We take this opportunity to close out the KMI and MRK positions. KMI was a bearish earnings trade that did not move much post-earnings while MRK’s bullish thesis becomes invalidated with price unable to break above the $82 resistance level.

View FB Trade

FB Bullish Trade Idea:
Our bullish trade idea for today is Meta Platforms Inc (FB). Meta declined significantly after its recent earnings announcement indicated very slow user growth and a sluggish start to its Metaverse segment. However, from a valuations perspective, FB is attractive as it is now trading at July 2018 levels despite profitability currently twice as high as it was back then. 

The trade structure used is a Call Diagonal. By selling a shorter dated call option, we are reducing the cost basis of the more expensive, longer dated call. As we approach expiration for the shorter dated call option, we will be looking to roll the short call to collect more premium and reduce the overall cost basis further. 

View FB Trade

Taking Partial Profits

• CLF – 51% Gain: Short Mar 18, 2022 14/16 Put Verticals​ @ $0.35 Debit. Close half of this position. For example, if 10 contracts were opened for this trade, we recommend closing 5 contracts. 

DailyPlay Positions Outlook

Equities reversed lower today after recovering earlier this week. SPY declined 2.35% and is now back below a key $453 area which may indicate that further downside is expected with additional support at $428. With the Non-Farm Payrolls announcement this morning,  volatility can be expected at the open so we take this opportunity to take partial profits on the CLF trade by closing half the position. 

We maintain our bullish outlook for CLF, but price has reached a key area at $19 and the CLF Put Credit Spread is at a 51% profit. By closing half the positon, we are locking in partial profits while still maintaining upside exposure in CLF. 

XLE – 9% Gain: Feb 18, 2022/Jun 17, 2022 55/59 Call Diagonals​ @ $3.95 Credit

DailyPlay Positions Outlook:

As equities continue to recover this week, both the SPY and QQQ managed to break above key resistance levels at $453 and $353 respectively. A disappointing Meta earnings announcement has seen some risk aversion with the dollar index inching higher and moving back above the 21 D EMA. We take this opportunity to close out the XLE call diagonal trade for a limited profit after XLE rallied above the short $59 strike which limits further gains. 

View TGT Trade

TGT Bullish Opening Trade Signal

Strategy Details

Strategy: Call Debit Spread

Strategy Direction: Bullish

Details: Buy March 4, 2022 $220/$235 Call Vertical @ $5.04 Debit Limit Order

Counter Trend Signal: This is a bullish strategy on a stock that is experiencing a bearish trend. 

1M/6M Trends: Bearish/Bearish

Technical Score: 4/10

OptionsPlay Score: 109

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.

Exiting the Trade

As this is a Debit Spread, look to take profits at 75% – 100% gain and cut losses at 50%:

Take Profits: $8.82 – $10.08 Credit

Stop Loss: $2.52 Credit

Taking Profits

• FANG: 46% Gain: Buy to close FANG Feb 18, 2022 $110/$125 Put Verticals @ $3.15 Debit

FDX Adjustment

For today’s DailyPlay, are adjusting our open FDX position. This position was opened on December 28th, 2021 as a Call Diagonal trade. The short leg for this trade has since expired worthless which means that the cost basis of the long April $250 strike has reduced from $18.85 to $16.42. As the short leg has expired, we will be selling another OTM call to further offset the overall cost and breakeven of the bullish FDX position:

• Sell to open Feb 25, 2022 $270 Call

Please note that this is not an open signal for the FDX Call Diagonal Trade, this signal should only be used if you are already in the FDX trade that was opened on December 28th, 2021.