Below is a daily chart of iShares Transportation Average (IYT), $173.04.
Trade: We recommend selling 10 Apr $162/159 bull put spread (51 DTE) for $500 (current mid-point, although this does not guarantee a fill since spready).
Technical Setup: Breakout daily and weekly charts.
Option Strategy: Bull Put Credit Spread. Defined risk strategy where you make maximum profit (net credit received) if the stock closes above the short put strike at expiration. We sell put strike price below support where the pattern suggests that the stock will not close under at expiry, and simultaneously purchase lower strike put than the one sold as a hedge and to reduce margin. The return on investment (ROI) is the credit received divided by the maximum loss (i.e., width of strike prices less premium received). The break even is the higher strike price less credit received (i.e., also your cost basis if assigned the stock). Considered a mildly bullish strategy since we are not buying calls or stock and just calling a short-term bottom in the pattern. Trade has positive theta (meaning you make money on time decay) making it a high probability trade since we time with the technical pattern.
Stop Loss: $166.88.
Below is a daily chart of Alaska Air Group, Inc. (ALK), $100.81.
Trade: We recommend selling 10 Apr $95/90 bull put spread (51 DTE) for mid-point (currently $.93/share).
Technical Setup: Breakout to all-time highs daily and weekly charts.
Option Strategy: Bull Put Credit Spread. See above.
Stop Loss: $95.68.
Below is a daily chart of JetBlue Airways Corporation (JBLU), $20.44.
Trade: We recommend selling 10 Apr $19 naked puts (51 DTE) for $400.
Technical Setup: Breakout from daily consolidation, weekly minor support, and strong transports.
Option Strategy: Short Naked Puts. Similar to bull put spread except not buying the lower strike put. We sell put strike price below support where the pattern suggests that the stock will not close under at expiry. In exchange for the premium received, put seller has the obligation to buy the underlying stock at the strike price on or before expiry. The Max Gain is the Premium received, which is realized if the stock closes above the short put strike at expiration. The return on investment (ROI) is the credit received divided by the margin required to hold the position. The break even is the short strike price less credit received (i.e., also your cost basis if assigned the stock). Considered a mildly bullish strategy since we are not buying calls or stock and just calling a short-term bottom in the pattern. Trade has positive theta (meaning you make money on time decay) making it a high probability trade since we time with the technical pattern.
Stop Loss: $19.18.
Below is a daily chart of Ross Stores, Inc. (ROST), $66.47.
Trade: We recommend selling 10 Apr $70/75 bear call spread (51 DTE) for around $.55/share (current mid-point).
Technical Setup: Bearish Wide Range Bar (-WRB) reversal at Major Resistance on daily and weekly charts.
Option Strategy: Bear Call Credit Spread. Defined risk strategy where you make maximum profit (net credit received) if the stock closes below the short call strike at expiration. We sell call strike price above resistance where the pattern suggests that the stock will not close above at expiry, and simultaneously purchase higher strike call than the one sold as a hedge and to reduce margin. The return on investment (ROI) is the credit received divided by the maximum loss (i.e., width of strike prices less premium received). The break even is the lower strike price less credit received (i.e., also your cost basis if assigned the stock). Considered a mildly bearish strategy since we are not buying puts (or shorting stock) and just calling a short-term top in the pattern. Trade has positive theta (meaning you make money on time decay) making it a high probability trade since we time with the technical pattern.
Stop Loss: $69.62.
Below is a daily chart of iShares 20+ Year Treasury Bond (TLT), $119.17.
Trade: We recommend selling 5 (half lot) Apr $123/128 bear call spread (51 DTE) for current mid-price of $.57/share or better. Can add the back half for $.85/share (if TLT bounces; otherwise, can add tomorrow under today’s low).
Technical Setup: Bearish gap to low range of sideways consolidation and weekly bearish 2-bar reversal (note: bonds are lower today and should continue to fall in anticipation of higher interest rates).
Option Strategy: Bear Call Credit Spread. See above.
Stop Loss: $122.52.
Adjustments and Comments on Open Advisory Letter Trades
VRX – Sold 10 Apr $12.5/7.5 bull put spread for $.470. Note: Even with earnings gap down, because of our strategy in selling OTM puts, the theory of time decay still made the trade profitable. Stopped out at $.33/share for $140 gain.
SPWR – Purchased at $7.89. Note: We are going to approach this as a long-term Core holding because of the bullish alignment of multiple time frames; thus, please note that holding over earnings is higher risk. Target: $11.00 – 14.00. Had great move so move stop loss to $7.89.
SWKS – Sold 10 Mar $90/85 bull put spread for $450. Pulled in last week but looking good. Stop Loss: $90.48.
DOW – Sold 10 April $57.5/52.5 bull put spread for $550. Covered half at $.26/share for 50% of Max Gain in a few days with nice move. For back half, bid to close at $.10 and move stop loss to break even.
XLU – Sold 10 Apr $48 puts for a net credit of $630. Covered half at $.23/share for 65% of Max Gain in a few days for $200 gain on 5-lot. For back half, had bearish gap today so let’s close at mid-point (currently $.29 x .31) to book gains and not have to wait for April expiry. Total gain $365.
BHI – Sold 10 Mar 62/65 bear call spread for $520. Stopped at break even.
JWN – Sold 10 Mar $42.5/37.5 bull put spread for $230. Stop Loss: $42.18.
RH – Sold 10 Apr $25/20 bull put spread for $400. Stop Loss: $24.88.
LRCX – We recommend two trades depending on your bullishness. Trade 1: Sold 10 Mar $115/105 bull put spread for $800. Trade 2: Bought 5 Mar $110 calls for $9.15/share. For the Long Call, sold the Mar $120 calls against it for $1.80/share to convert to Bull Call Spread and lowering cost basis to $7.35/share. Stop Loss: $115.48.
UA – Sold 10 Apr $20/22.5 bear call spread for $550. Move stop loss $20.02.
SALT – Sold 10 Jun $5 puts for a net credit of $500. Quote now is $.20 x .40 so move stop to break even and place GTC limit to close at $.10/share for 80% max profit.
GPRO – Sold 10 Apr $8/6 bull put spread for $330. Stop Loss: $8.68.
HUM – Sold 10 Apr $195/185 bull put spread for $1,450 (had $1.00/share mid-point at open but I got filled at $1.45/share). Nice entry and breakout, move stop loss break even.
HLF – No fill yet on selling 10 Apr $65/75 bear call spread for $.85/share but still valid. Stop Loss: $63.22.
CHKP – Under $98.10, we recommend buying 5 Mar $100 puts (17 DTE) at mid-point (currently $2.05 x 2.30/share). Stop Loss: $101.22.
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,
Greg Capra
Managing Director and Pristine Founder
Dan Gibby
Chief Options Strategist
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Twitter: @GregCapra
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