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Proactive Spreads, October 12th, 2021 – ICE, COP, SMH

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Markets are still a choppy mess right now. We’ve got potential changes in Fed policy due to “transitory” economic data, a ramp up in crude and natural gas, the debt ceiling/infrastructure, and the Chinese Evergrande situation that everyone thinks is contained. Oh, and earnings.

In other words, just another week in the markets.

We will most likely stay choppy for a while as we continue to shake out the weak hands. It’s very possible that this is a longer term topping pattern, yet we won’t know how strong the odds are on that until we get more data and price action. I currently view the S&P as roughly a coin flip here, with not much of an edge on a daily chart. So right now we will focus on playing pullbacks in two strong stocks, and picking a fade level in the Semiconductor sector.

Trade #1: ICE

Clean multi-week breakout for ICE. This is probably related to the uptick in trade activity in commodities. This setup will have earnings risk, yet this stock doesn’t have a tendency for massive moves. That said, we’ll focus on December options for this one to give more wiggle room through earnings.

Trade Setup

Expected Price: 123.3

Sell to Open ICE 17Dec21 115/110 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 114.89

Trade #2: COP

Conoco is running hot on the back of solid moves in oil and gas. I’m looking for the first pullback from this breakout for a fresh entry.

Earnings is in this cycle, so again we will focus on Dec options.

Trade Setup

Expected Price: 67.33

Sell to Open COP 17Dec21 62.5/60 Put Spread

Tier 1: Enter at 0.65, Exit at 0.33

Tier 2: Enter at 0.91, Exit at 0.59

Tier 3: Enter at 1.17, Exit at 0.79

Stop Out If Close Under 62.39

Trade #3: SMH

This is a “wishful thinking” trade where if we get a break under the 200 day moving average, we can see a swift move to the middle of the trading range.

Trade Setup

Expected Price: 240

Sell to Open SMH 19Nov21 220/215 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 219.89

Disclaimer

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