Update: March 14th, 2019
Rolling the long call up to cut down risk.
Update: March 19th, 2019
Adjusting and cutting risk. (Again.)
Update: March 11th, 2019
Closing out the trade.
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By Steven Place
By Steven Place
The S&P gapped up into the 2800 resistance level and buyers finally seemed to have run out. While the near term rally may not yet be over… I think we’re close. The market has spent a lot of energy rallying up to key resistance without any kind of major pullback. I expect that the correction will be sideways and rotational… not anything like we saw in the Q4 2018 correction.
The best plan of attack now is to start finding your favorite stocks and levels you want to be involved in. Many overextended stocks will still keep their trend and strength into pullbacks, so we want to be ready if and when profit taking shows up.
Looking for pullback to the previous breakout level.
Trade Setup
Expected Price: 412.44
Sell to Open BA Apr 385/380 Put Spread
Tier 1: Enter at 0.85, Exit at 0.35
Tier 2: Enter at 1.15, Exit at 0.65
Tier 3: Enter at 1.45, Exit at 0.95
Similar as in BA – I want to see a retest of the most recent pivot highs.
Trade Setup
Expected Price: 82
Sell to Open NKE Apr 75/72.50 Put Spread
Tier 1: Enter at 0.36, Exit at 0.06
Tier 2: Enter at 0.51, Exit at 0.21
Tier 3: Enter at 0.66, Exit at 0.36
ETSY had a great earnings report and the stock is gapping higher. This is a PEAD setup, where I expect the stock to drift higher over the next few months.
Trade Setup
Expected Price: 67.20
Sell to Open ETSY Apr 55/50 Put Spread
Tier 1: Enter at 0.55, Exit at 0.05
Tier 2: Enter at 0.85, Exit at 0.35
Tier 3: Enter at 1.15, Exit at 0.65
By Steven Place
The market has been a straight shot higher without any significant reversion since the year started.
Overall, we’re averaging 0.45% gains every single day. If this continues, we hit 3000 before the end of March. I don’t think that’s sustainable.
That being said, the breadth behind this move indicates that a retest of the swing lows isn’t in the cards. Odds are, as we head into the Spring, the market will start to exhibit actual reversion.
Range bound action.
As the S&P heads into the 2800 resistance, I expect some supply to come onto the market. My gut here says that we will overshoot the Oct-Dec highs before seeing the breakout fail. It will be enough of a move to suck in some new buyers and squeeze out the last remaining shorts.
The Russell 200 index is currently 9% above its 50 day moving average and headed into key price resistance, along with a declining 200 day moving average. This is a good place to scale short with the expectation that, while we won’t crash, we’ll see a pullback and some sideways action.
Trade Setup
Expected Price: 1575
Sell to Open RUT Apr 1670/1675 Call Spread
Tier 1: Enter at 0.65, Exit at 0.15
Tier 2: Enter at 0.95, Exit at 0.45
Tier 3: Enter at 1.25, Exit at 0.75
Looking for a retest of the previous swing lows as well as the rising 50 day moving average.
Trade Setup
Expected Price: 123.50
Sell to Open GLD Apr 120/117 Put Spread
Tier 1: Enter at 0.30,, Exit at 0.05
Tier 2: Enter at 0.50, Exit at 0.15
Tier 3: Enter at 0.70, Exit at 0.35
Last December, AAPL had a “baby and bathwater trade” where, after a massive decline, they guided down ahead of earnings. When you see a gap down on guidance after a nasty selloff… the bad news gets priced in. That’s what happened with AAPL, and it rallied on earnings.
I expect, along with the other FANG stocks, a range to get knocked out. I want to be bullish here, and then start looking at bearish setups when it comes into the 190s.
Right now, I’ll start scaling into bull put spreads.
Trade Setup
Expected Price: 171.07
Sell to Open AAPL Apr 160/155 Put Spread
Tier 1: Enter at 0.77, Exit at 0.27
Tier 2: Enter at 1.07, Exit at 0.57
Tier 3: Enter at 1.37, Exit at 0.87
By Steven Place
By Steven Place
By Steven Place