Today we’re looking at a chart of the Nasdaq 100 index, which seems to be the main “key” for this market. Led by the FANG stocks (facebook, apple, amazon, netflix, google), there was some massive profit taking last friday.
The backdrop to this has been a strong trending market since the beginning of the year. We’re starting to see evidence of distribution, and much higher odds of reversion. Which is good for us because reversion plays are the easiest to profit from with credit spreads.
The 5600 level is key, if that is lost then look for a test of the March range.
Trade #1: MA
Looking for a pull into the rising 50 day moving average, along with prior resistance.
Expected Price: 118
Sell to Open MA Jul 115/110 Put Spread
Tier 1: Open at .90, Close at 0.30
Tier 2: Open at 1.30, Close at 0.90
No Tier 3
Extra Risk Management: If 115 is hit, we will roll down and out to August options, then add the third tier.
Trade #2: NFLX
Gap fill support and prior resistance is where I expect the stock to trade into and find support.
Expected Price: 145
Sell to Open NFLX Aug 120/115 Put Spread
Tier 1: Open at 0.65, Close at 0.15
Tier 2: Open at 0.95, Close at 0.65
Tier 3: Open at 1.25, Close at 0.95
Trade #3: BABA
This is a stretch, and I’m not sure it will get hit, but I want to get involved just above the gap fill level.
Expected Price: 127
Sell To Open BABA Aug 110/105 Put Spread
Tier 1: Open at 0.70, Close at 0.20
Tier 2: Open at 1.00, Close at 0.70
Tier 3: Open at 1.30, Close at 1.00