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Proactive Spreads, July 16th, 2020 – GLD, COST, ADBE

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The churn underneath the surface is quite a sight.

Tech earnings are up on deck soon, so you’re seeing profit taking in the FANG stocks. On the other side, banks are ripping post-earnings, effectively creating a “wash” as the market goes sideways.

This is fairly constructive price action. Tech could have a few more “rug pulls” as company earnings come in, but as it stands this is fairly vanilla price action.

Key level for SPX is 3125, the longer we hold above that level the higher the odds we see continuation. Couple that with the fact that all the major moving averages are in bullish alignment and we’re still set up for trend continuation.

If (and when) the markets get too stretched then we will start looking at short-biased trades, but we simply are not there yet. We will focus on selling premium to the long side.

Trade #1: GLD

After a solid breakout to new highs, GLD ran from 165 to the low 170s. Odds are it will just continue here, but I want to be prepared if we see a decent dip. There is a gap fill and a rising 20 day moving average at 167.50, so if we come into that level I wan to be involved.

Trade Setup

Expected Price: 167.6

Sell to Open GLD 7Aug20 165/162 Put Spread

Tier 1: Enter at 0.5, Exit at 0.2

Tier 2: Enter at 0.7, Exit at 0.3

Tier 3: Enter at 0.9, Exit at 0.37

Stop Out If Close Under 162.89

Trade #2: COST

After clearing to new highs, the stock isn’t seeing much followthrough… maybe it’s time for it to dip a little further. I want to be involved in that gap fill.

Trade Setup

Expected Price: 317.2

Sell to Open COST 21Aug20 300/295 Put Spread

Tier 1: Enter at 0.85, Exit at 0.35

Tier 2: Enter at 1.19, Exit at 0.54

Tier 3: Enter at 1.53, Exit at 0.66

Stop Out If Close Under 299.89

Trade #3: ADBE

With the selloff last week, the stock has probably topped in the short term. THere is a massive level around 380 that I think will hold… in fact I think the stock will hold higher levels than that and start to create a trading range. We are “close enough” to initiate a new position.

Trade Setup

Expected Price: 421.83

Sell to Open ADBE 21Aug20 375/370 Put Spread

Tier 1: Enter at 0.65, Exit at 0.12

Tier 2: Enter at 0.91, Exit at 0.21

Tier 3: Enter at 1.17, Exit at 0.21

Stop Out If Close Under 374.89

Disclaimer

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