View BA Trade

Market Outlook:

Another week of high volatility saw equities decline significantly on Friday. Both SPY and QQQ moved 0.87% and 1.74% lower respectively but still managed to maintain above key support levels which is encouraging heading into this week. We have seen significant rotation into Utilities and Staples as defensive sectors provide protection against the broader market sell-off. Small caps suffered the most last week ending the week declining over 2% and back to the major $213 support level, once again falling to the year-long range between $213 and $233 which is concerning. Volatility in bonds was also high as TLT broke above the major $151 resistance level with strong momentum sending yields below the 137 basis point level. 

BA Bearish Trade Idea:
Our bearish trade idea today is Boeing (BA). From a macro and fundamental perspective, BA has been on the backfoot due to lack of travel demand caused by COVID as well as the grounding of the 737 MAX airliner due to safety concerns. While we do see the slight improvement in revenues and EPS trends recently, the timing of the new variant causing additional travel restrictions adds further pressure for aircraft demand. We also see Airbus gaining market share in the narrowbody category relative to Boeing. From a technical perspective, BA has broken below the $205 area of support and has failed to break back above it in recent days. Both 1M and 6M trends are bearish and with a technical score of 3 (out of 10), BA is a weak stock that will likely continue lower. 

As this is a credit spread, look to take profits at 50% gain and cut losses at 100%:

• Take Profit: $4.17 Debit
• Stop Loss: $16.70 Debit

View BA Trade

Closing Trades

• WMT – 69% Gain: Short Dec 31, 2022 $143/$148 Call Vertical @ $0.55 Debit

DailyPlay Positions Outlook:

As systemic risks continue to rise due to the ambiguity of the new Omicron variant, we have taken a hands-off approach with the DailyPlay positions this week. Market volatility remains high with the VIX reaching 30 twice this week and with Non-Farm Payroll data being released today, we expect more volatility to end the week. While equities did recover yesterday, downside risks remain and the uncertainty of the new variant has not changed. We take this opportunity to take profits on the WMT trade that was opened this week. 

Prakash Vijayanath
Analyst at OptionsPlay

Closing Trade

XPEV – 30% Gain: Long Jan 21, 2022 $45/$60 Call Verticals @ $6.05 Credit

DailyPlay Positions Outlook:

As Omicron concerns continue to mount, equities remain on the backfoot this week and continue to decline with the SPY and QQQ declining 1.11% and 1.7% respectively yesterday. While the key $382 level remains intact for QQQ, SPY broke below the $453 support level yesterday which provides evidence of a further move lower this week. We take this opportunity to close out the XPEV trade for a limited profit despite a significant pullback yesterday. 

Prakash Vijayanath
Analyst at OptionsPlay

EXPE – 35% Loss: Long Jan 21, 2022 $175/$195 Call Vertical @ $4.31 Credit

C – 94% Loss: Long Dec 17, 2021 $70/$72.5 Call Vertical @ $0.15 Credit

DailyPlay Positions Outlook:

As uncertainty creeps into markets due to the new Omicron variant, stocks sold off heavily yesterday. However, there has been a recovery in pre-market as well as European and Asian equities rebounding strongly this morning and the major US indices are expected to open higher. While this is encouraging, the uncertainty and lack of data on the new variant is concerning. This week, our priority will be to reduce exposure in our DailyPlay portfolio and close trades. We take this opportunity to close out C and EXPE. 

Prakash Vijayanath
Analyst at OptionsPlay

Closing Trades

• CCI – 51% Gain: Short Dec 17, 2021 170/180 Put Verticals @ $1.65 Debit

DailyPlay Positions Outlook:

Equities managed to recover yesterday after Friday’s strong decline. However, details about the new COVID variant are still fairly unknown and equities may be at significant risk in the event that the current vaccines do not provide any protection. The sharp rise in Delta cases, even before the Omicron variant discovery, already poses a threat to a year-end rally as many governments are once again considering lockdowns or partial lockdowns. This will likely have a large impact for Q4 earnings season. We take this opportunity to reduce the bullish exposure on our portfolio and take profits on CCI which has reached the target take profit level 

Prakash Vijayanath
Analyst at OptionsPlay

View WMT Trade

The bearish DailyPlay for Tuesday, November 30th is Walmart Inc (WMT). WMT is part of the Staples sector which is at a high risk of a disrupted holiday season due to the rise in COVID cases. 

Technical View

• Break below and failed retest of the $143 level.
• Weakening Technical Score (6 out of 10)
• Bearish 1M and 6M trends

Fundamental View

• Risks include wage pressures, supply chain bottlenecks, and weaker consumer spending.
• Growing COVID cases globally will have a negative impact on WMT’s holiday sales. 
• Earnings: Feb 17, 2022 (79 days)

As this is a credit spread, look to take profits at 50% gain and cut losses at 100%:

• Take Profits: $0.90 Debit
• Stop Loss: $3.60 Debit

View WMT Trade

View IBB Trade

The bearish DailyPlay for Wednesday, November 24th is the iShares Biotechnology ETF (IBB). IBB has been on a bearish trend since mid-September and has recently broken below a key support area ($154) with strong bearish momentum. Price pulled back late yesterday providing a better risk/reward bearish entry. 

Both 1M and 6M trends have been bearish since November 5th and with a technical score of 5 (out of 10), IBB is a neutral ETF that is expected to move lower from current levels. The next area of support for IBB is $146 and should this level be broken, additional support can be found at $138. 

As this is a credit spread, look to take profits at 50% gain and cut losses at 100%:

• Take Profits: $1.25 Debit
• Stop Loss: $5.00 Debit

View IBB Trade

Closing Trade

CHTR – 55% Gain: Short Dec 17, 2021 $695/$730 Call Verticals @ $5.45 Debit

DailyPlay Positions Outlook:

Equities pulled back later in trading yesterday as yields jumped higher due to Jerome Powell being nominated for a 2nd term as Fed Chair, the more hawkish choice over the vice-chair nomination, Lael Brainard. While we do see some headwinds for equities approaching the year-end, especially with the surge in COVID cases in Europe, our overall outlook remains bullish. We are taking this opportunity to take profits on our short CHTR position which has reached our take profit level and is also very close to being 21 days away from expiration. 

Prakash Vijayanath
Analyst at OptionsPlay

View AA Trade

Market Outlook:

Performance in equities is showing signs of narrowing to the higher weighted mega-cap names as we start to see the Nasdaq-100 outperform the S&P 500 as well as small caps. Should this continue, it may indicate an unhealthy rally in equities with limited participation. The Nasdaq-100 broke to new all-time highs on Friday while the S&P 500 got rejected once again at the $470 level. We have also noticed more volatility in bonds and rates which are showing signs of further consolidation as markets continue to price in macro data in anticipation for the projected interest rate hikes. Despite the somewhat higher rate environment, higher beta growth stocks extend their outperformance relative to value stocks and this is expected to continue this week. 

AA Bullish Trade Idea:
Our bullish trade idea today is Alcoa Corp (AA). AA engages in the mining and production of aluminum products and has a large exposure to aluminum prices. Overall, the fundamentals for aluminum are strong with the ongoing recovery creating a growing demand. Looking at AA’s fundamentals, the balance sheet improvement has been impressive. AA has strong potential to generate free cash flow through increasing prices as well as cost optimization efforts. From a technical point of view, AA has been on a long-term bullish trend with price action shifting more neutral in recent weeks. Price has pulled back to an area of support which provides a good bullish credit spread opportunity. With a technical score of 10 (out of 10), AA is a very strong stock that will likely continue higher. 

As this is a credit spread, look to take profits at 50% gain and cut losses at 100%:

• Take Profit: $0.99 Debit
• Stop Loss: $3.94 Debit

View AA Trade

Closing Trade

• MGM: 101% Loss– Short Dec 17, 2021 $50/$47 Put Vertical @ $2.35 Debit