The bounce last week was incredibly aggressive. It was a combination of the Evergrande news fizzling, eager dip buyers, way-too-eager hedgers, and option traders getting smoked from selling calls too early.
And the Fed. We'll just get that reason out of the way, too.
It's very possible that this was enough technical damage to induce more of a range bound trade in the S&P 500, yet clear leadership is developing in the commodity space. It's so underrepresented in the SPX that we could see these names have sustainable trends while the indices look like hot garbage.
Today we'll focus on the strongest names on my list right now, and plan our entries for the first pullback we can get.
Trade #1: CF
Monster rally in CF, and it's coming into resistance at 56. It could blow through it, yet I would like to see a good sized pullback to start scaling into the position.
Trade Setup
Expected Price: 53.5
Sell to Open CF 19Nov21 47.5/45 Put Spread
Tier 1: Enter at 0.46, Exit at 0.11
Tier 2: Enter at 0.644, Exit at 0.26
Tier 3: Enter at 0.828, Exit at 0.35
Stop Out If Close Under 47.39
Trade #2: COP
Great long term breakout in Conoco. We'll be looking for the retest of the breakout level.
These options do include earnings, so I'm assuming that our initial fills will be at a lower credit in case we get filled post earnings.
If we see a sharp short term pullback, then you will be able to secure a higher credit. This is one of those instances where you should set price alerts first, and then look at the option pricing.
Trade Setup
Expected Price: 62.2
Sell to Open COP 19Nov21 57.5/55 Put Spread
Tier 1: Enter at 0.5, Exit at 0.16
Tier 2: Enter at 0.7, Exit at 0.34
Tier 3: Enter at 0.9, Exit at 0.45
Stop Out If Close Under 57.39
Trade #3: UBER
A slightly different chart here, because I want to show the anchored VWAP from the large gap. That also coincides with key pivot levels, and some moving averages will catch up to price into that pullback.
Trade Setup
Expected Price: 45.29
Sell to Open UBER 19Nov21 40/37.5 Put Spread
Tier 1: Enter at 0.47, Exit at 0.12
Tier 2: Enter at 0.658, Exit at 0.28
Tier 3: Enter at 0.846, Exit at 0.37
Stop Out If Close Under 39.89