Below is a daily chart of iShares 20+ Year Treasury Bond (TLT), $118.20:
Trade: We recommend selling 10 Jan $115/112 bull put spread (30 DTE) for a net credit of $500.
Strategy: Possible breakout from rounded bottom daily after failed breakdown (Breakdown Failure), multi-week climactic sell off, and monthly support Note that although we are still long-term bearish on bonds, they are oversold and looked poised for a relief rally, so we are making this a short-term income trade in selling premium.
Max Gain: Credit received of $500 which is realized if the stock closes above the short strike by expiration.
Max Loss: If assigned, will have a cost basis of $114.50/share, but we will not get assigned with stop loss.
Breakeven: Short strike price less premium received.
Stop Loss: $116.58
Below is a daily chart of FedEx Corporation (FDX), $193.27
Trade: We recommend selling 10 Jan $205/215 bear call spread (30 DTE) for a net credit of $650.
Strategy: Bearish (earnings) gap down from consolidation after climactic rally on weekly chart.
Max Gain: Credit received of $650 which is realized if the stock closes below the short strike by expiration.
Max Loss: If assigned, will have a cost basis of $205.65/share, but we will not get assigned with stop loss.
Breakeven: Short strike price plus premium received.
Stop Loss: $202.22
NOTE: TWLO also has an attractive pattern for selling a bull put spread; however, it is too spready to recommend an official trade. And we will continue to watch NVDA for a bear call spread.
Adjustments and Comments on Open Trades
FSLR – Shorted 10 Nov $35 puts for $580. Got assigned, so sold 10 Dec 32.5 calls for $1,700, converting the position into a covered call. Rolled the short Dec calls to the Jan 37.5 calls for net credit of $.85, lowering cost basis.
CF – Shorted 10 Dec 22.5 puts naked for a limit of $.15/share and $.20/share and for an average basis of $.175/share. Maintain stop break even.
TER – Shorted 10 Jan $24/21 puts (i.e., a bull put spread) for $520. Cost to close currently $.15, move stop break even. Acting well, no changes.
SPWR – Shorted 10 Jan $6 puts for $250. Had nice breakout so move stop break even.
Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com
All the best,
Dan Gibby
Chief Option Strategist
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Twitter: @GregCapra
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