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Proactive Spreads, August 31st, 2021 – CVNA, GOOGL, DIS

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This week it seems that large cap tech is taking the reigns of the market rally. FB, GOOGL, AAPL, AMZN… all monster moves, some of which is driven by option related voodoo (short gamma on upper call strikes).

It’s hard for the market to selloff when the demand for hedging is still incredibly high. From the recent pullback in to 4375, we saw the VIX jam into 23. If (and that’s a big if) that volatility finally comes in, then we can make the case for a stronger market drawdown.

For now, we can use the low inter-market correlations to our advantage.

Trade #1: CVNA

Carvana had a great rally over the past few months, and this is the first decent pullback we’ve seen. The options market is not terribly liquid, so consider dropping size a bit or more aggressively scaling out.

Trade Setup

Expected Price: 328.06

Sell to Open CVNA 15Oct21 300/290 Put Spread

Tier 1: Enter at 2.27, Exit at 0.95

Tier 2: Enter at 3.178, Exit at 1.8

Tier 3: Enter at 4.086, Exit at 2.42

Stop Out If Close Under 299.89

Trade #2: GOOGL

This is a tricky one, I think we can start looking for a fade in GOOGL, but must respect the overall trend. I want to see it go parabolic first, and will be using the upper edge of the turning point indicator to dictate what strikes to select.

Trade Setup

Expected Price: 2981

Sell to Open GOOGL 17Sep21 3020/3030 Call Spread

Tier 1: Enter at 2.75, Exit at 1.51

Tier 2: Enter at 3.85, Exit at 2.62

Tier 3: Enter at 4.95, Exit at 3.53

Stop Out If Close Over 3020.11

Trade #3: DIS

Looking for a breakout here, and will anchor against the recent swing lows at 170. There’s the possibility that the stock knocks out a range a bit more, and we can use our scaling protocol to our advantage here.

Trade Setup

Expected Price: 181.3

Sell to Open DIS 15Oct21 170/165 Put Spread

Tier 1: Enter at 0.75, Exit at 0.02

Tier 2: Enter at 1.05, Exit at 0.26

Tier 3: Enter at 1.35, Exit at 0.32

Stop Out If Close Under 169.89

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