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Proactive Spreads, August 27th, 2020 – CRM, TLT, MSFT

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The march continues. After some Fed news that spooked the markets a bit, stocks recovered and finished near their highs.

Look, every market situation is going to be unique, as competing narratives and capital flows will be different every time.

Yet this market is acting weird. The VIX is incredibly elevated relative to the actual volatility in the market. AAPL is hilariously overweighting tech stocks, along with MSFT, GOOGL, FB and AMZN.

Those 5 stocks make up 50% of the weighting in the Nasdaq. Very top heavy, and if you see one rug pull, it could go into the rest of the market.

And we saw a little bit of that today. AAPL took a hit, the market got soft, but there is just SO MUCH LIQUIDITY relative to the available assets to invest in.

Big water, small hose.

My focus still is going to be on names that have seen momentum, as they tend to carry that momentum long enough to get us some profits on the trades.

Trade #1: CRM

Simple setup here– it’s a massive earnings breakout on good news, and odds are the stock is going to continue higher. We’re going to be a little more aggressive, which decreases our odds of success yet increases the potential profit.

Trade Setup

Expected Price: 275.08

Sell to Open CRM 18Sep20 255/250 Put Spread

Tier 1: Enter at 0.7, Exit at 0.04

Tier 2: Enter at 0.98, Exit at 0.17

Tier 3: Enter at 1.26, Exit at 0.21

Stop Out If Close Under 254.89

Trade #2: TLT

Rates are seeing a good move higher, which leads to a selloff in TLT. I’m looking for the lows from this summer to come into play and will “catch the knife” into those levels.

Note: the duration here is different than the other setups because TLT has lower premium available in Sep options.

Trade Setup

Expected Price: 158.66

Sell to Open TLT 16Oct20 150/145 Put Spread

Tier 1: Enter at 0.65, Exit at 0.09

Tier 2: Enter at 0.91, Exit at 0.09

Tier 3: Enter at 1.17, Exit at 0.09

Stop Out If Close Under 149.89

Trade #3: MSFT

MSFT has seen a clear technical breakout, and I want to be involved on any retracements back to that level.

Trade Setup

Expected Price: 221.88

Sell to Open MSFT 18Sep20 202.5/200 Put Spread

Tier 1: Enter at 0.39, Exit at 0.03

Tier 2: Enter at 0.546, Exit at 0.146

Tier 3: Enter at 0.702, Exit at 0.192

Stop Out If Close Under 202.39

 

Disclaimer

U.S. GOVERNMENT REQUIRED DISCLAIMER – COMMODITY FUTURES TRADING COMMISSION. FUTURES AND OPTIONS TRADING HAS LARGE POTENTIAL REWARDS, BUT ALSO LARGE POTENTIAL RISK. YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO ACCEPT THEM IN ORDER TO INVEST IN THE FUTURES AND OPTIONS MARKETS. DON’T TRADE WITH MONEY YOU CAN’T AFFORD TO LOSE. THIS WEBSITE IS NEITHER A SOLICITATION NOR AN OFFER TO BUY/SELL FUTURES OR OPTIONS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED ON THIS WEBSITE. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOLOGY IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY, SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN