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Proactive Spreads, October 5th, 2021 – TGT, SHOP, XLV

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Captain obvious here to tell you that volatility has picked up.

But it’s probably priced in. I’ll keep beating this dead horse, but the panic hedging that took place two Mondays ago is helping to cushion the downside and prevent any followthrough. We’ll probably continue to see this high-vol choppiness.

The other dead horse– this is being driven by a large cap tech selloff. During this pullback, the R2K came out OK, along with some key sectors like energy and commodities.

So that’s where we sit right now… a vanilla correction that has a ton of hedging already priced in, leading to some garbage range headed into November.

We’ve got a lot of trades already triggered so make sure to focus on those for risk management. If we get a bounce with vol dropping off then tiers 2 and 3 will be exited quickly. You can use those to re-enter if you want.

Trade #1: TGT

TGT has just about round-tripped the rally from two earnings ago. We’ve got the 200 day moving average just underneath current price, and this looks like a good spot to put on risk.

Trade Setup

Expected Price: 227.56

Sell to Open TGT 19Nov21 210/200 Put Spread

Tier 1: Enter at 1.5, Exit at 0.05

Tier 2: Enter at 2.1, Exit at 0.52

Tier 3: Enter at 2.7, Exit at 0.65

Stop Out If Close Under 209.89

Trade #2: SHOP

SHOP is coming into a few key levels. You’ve got a rising trendline going back to a year ago, prior pivot resistance at 1300, and the 200 DMA. We’ll look for one more push lower for a clean entry. This will have earnings risk with it, so consider cutting your size.

Trade Setup

Expected Price: 1269.85

Sell to Open SHOP 19Nov21 1100/1090 Put Spread

Tier 1: Enter at 1.9, Exit at 0.52

Tier 2: Enter at 2.66, Exit at 1.19

Tier 3: Enter at 3.42, Exit at 1.57

Stop Out If Close Under 1099.89

Trade #3: XLV

This is more of a macro bet, just in case healthcare/pharma continues to get hit. I will be using the support levels from the previous range in the low 120s as an entry. Odds are we won’t get it, but I want to be involved just in case.

Trade Setup

Expected Price: 121.47

Sell to Open XLV 19Nov21 115/113 Put Spread

Tier 1: Enter at 0.35, Exit at 0.06

Tier 2: Enter at 0.49, Exit at 0.18

Tier 3: Enter at 0.63, Exit at 0.24

Stop Out If Close Under 114.89

 

Disclaimer

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