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Proactive Spreads, August 6th, 2018 – MSFT, JPM, BA

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Markets are jamming higher, with the S&P 500 within spitting distance of the February highs. Is it possible that we just bust higher and never look back? I suppose, but I don’t think that we’ll trade like we did in 2017. Earnings are almost out of the way so any “good news” will start to fade and we could see a pull in.

The setups that I’m looking at today are those that will only happen if we do manage to get a rug pull. I want to be prepared if it does happen.

Trade #1: MSFT

It’s possible that MSFT chops around here and head to a new high. Here, I’m *hoping* for a lower low.

When you have an aggressive fade like we’ve seen, it’s possible that a lower low is knocked out to find the lower end of the range. It may happen, and if it does I want to be prepared for it.

Trade Setup

Expected Price: 103.90

Sell to Open MSFT 100/97.50 Put Spread

Tier 1: Enter at 0.48, Exit at 0.18

Tier 2: Enter at 0.63, Exit at 0.33

Tier 3: Enter at 0.78, Exit at 0.43

 

Trade #2: JPM

This is the strongest of the large cap financials. The 52 week highs are up on deck, but just like the MSFT trade I think that a lower-low fade could happen before that.

Trade Setup

Expected Price: 113.60

Sell to Open JPM Sep 110/105 Put Spread

Tier 1: Enter at 0.78, Exit at 0.28

Tier 2: Enter at 1.08, Exit at 0.58

Tier 3: Enter at 1.38, Exit at 0.88

Trade #3: BA

If BA tests the most recent support levels I want to start scaling into put spread sales.

Trade Setup

Expected Price: 327

Sell to Open BA Sep 305/300 Put Spread

Tier 1: Enter at 0.70, Exit at 0.20

Tier 2: Enter at 1.00, Exit at 0.50

Tier 3: Enter at 1.30, Exit at 0.80

Disclaimer

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