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Proactive Spreads, July 24th 2017 – NFLX, UNP

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Market hit new all time highs last week, with only a slight pullback. Tech is overbought, but mostly related to earnings moves… I expect a correction to follow, most likely sideways. We’ve talked about this kind of trade action for months now so it’s nothing out of the ordinary.

The only warning light I see is an incredibly low VIX, yet that can persist for longer than what we think. The gameplan here is still to look for stocks that have seen increases in volatility, most likely related to earnings, and continue to expect reversion after the big move.

Trade #1: NFLX

Nice gap up on earnings, it did see some secondary movement higher. There is a support level around 182, and I’m expecting a “rug pull” below that to stop out the early momentum chasers and allow the stock to consolidate a bit.

Trade Setup:

Expected Price: 180

Sell to Open NFLX Sep 165/160 Bull Put Spread

Tier 1: Open at .75, close at 0.25

Tier 2: Open at 1.05, Close at 0.75

Tier 3: Open at 1.35, Close at 1.05

Trade #2: UNP

Look for a test of this year’s support just above 100.

Trade Setup

Expected Price: 100

Sell to Open UNP Sep 95/90 Put Spread

Tier 1: Open at 0.60, Close at 0.10

Tier 2: Open at 0.90, Close at 0.60

Tier 3: Open at 1.20, Close at 0.90

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