Below is a daily/weekly/monthly chart of M&T Bank Corporation (MTB), $165.50.
Trade: We recommend selling 10 Apr $175/180 bear call spread (39 DTE) for $.65/share (current mid-point). Note: Close before 4/20 earnings.
Technical Setup: Breakdown daily after failed breakout (i.e., Shakeout), extend weekly, and climactic sell setup monthly chart.
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 breakeven is the short strike price plus 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.
Max Gain: Credit received of $650. Cushion of 6.2% to break even of $175.65.
Stop Loss: $172.44.
Adjustments and Comments on Open Advisory Letter Trades
JWN – Sold 10 Mar $42.5/37.5 bull put spread for $230. Stopped break even.
TLT – Sold 5-lot Apr $123/128 bear call spread for $.57/share and 5-lot for $.53/share for average of $.55/share. Close now into weakness at $.18/share for $370 gain to avoid FOMC volatility and 39 more days of open risk since over 50% of Max Profit in short time.
ROST – Sold 10 Apr $70/75 bear call spread for $550. Stop Loss: $69.62.
FXA – Sold 5 (half lot) Apr $77/79 bear call spread for $.40/share and 5-lot for $.36/share for average basis of $.38/share. Stopped at $.35/share for $30 gain.
BA – Trade #1: Sold 10 Mar $187.5/195 bear call spread for $.86/share. Mid-point to close is $.12/share so let’s close for $.14/share to book $720. Trade #2: Sold 10 Apr $195/210 bear call spread for $.98/share. Close the back half short Apr $195 calls for $.24/share to book $$370 (and closed half for $.60/share for $190 gain) for total $560 gain. This will leave us with a “free” long Apr $210 call since there was no premium to sell now.
VIAB – Sold 10 Apr $45/47.5 bear call spread $.43/share. Stop Loss: $45.12.
AI – Shorted 1,000 shares of the stock at $14.43. Trail stopped at $13.80 for $630 gain.
EEM – Sold 10 Apr $39/40.5 bear call spread for $.36/share. Move stop loss $38.52.
NFLX – Trade #1: Sold 10 Mar $145/152.5 bear call spread for $.65/share. Mid-point to close is $.27/share so close here for $ $380 gain. Trade #2: Sold 10 Apr $150/170 bear call spread for $2.90/share. Mid-point to close is $2.51/share so move stop break even.
XON – Sold 10 Apr $20/18 bull put spread for $350. Mid-point to close is $.20/share so close at $.25/share to book small $100 gain since stalling here at resistance.
HTZ – Sold 20 Apr $20/17.5 bull put spread for $600. Mid-point to close is $.40/share so move stop break even.
KBH – Purchased 10 Jul $15 calls (136 DTE) and sold the Apr 19 calls (45 DTE) for a net debit of $2.95/share. Note: Holding over earnings (4/12) is higher risk. Stop Loss: $15.88.
UA – Bought 10 Apr $22.5 puts for $4.25/share. Sold Mar $17.5 puts for .25/share to convert to Bear Diagonal and lower cost basis to $4.00/share. Move stop loss $18.42 (which will still be small profit because of put sold).
UAL – Trade #1: Sold 10 Apr (weekly 4/13) $79/82.5 bear call spread for $530. Mid-point to close is $.36/share so move stop break even. Trade #2: Sold 10 Mar $77/80 bear call spread for $270. Close at $.06/share for $210 gain.
GPI – Sold 10 Apr $85/90 bear call spread $.47/share. Mid-point to close is $.05/share (which won’t get filled because spreads opened), but bid $.20/close and move stop loss breakeven.
CSX – Sold 10 Apr $50/55 bear call spread for $.88/share. Note: Close before 4/18 earnings. Stop Loss: $50.32.
NMM – Purchased 2,000 shares of stock at $2.25. Nice move, move stop loss $2.25, and sell $1,000 shares around $260 for $350 gain.
WFT – Sold 10 Apr $6 naked puts spread for $.19/share. Stop Loss: None for now since bullish long term.
PNC – Sold10 Apr $135/140 bear call spread for $500). Note: Close before 4/18 earnings. Stop Loss: $132.22.
ATU – We recommend buying 1,000 shares of stock around $28.80 on a slight pull back. Target: $29.50 – 30.00 for swing trade. Note: Close before 3/ earnings. Stop Loss: $26.28.
CMCM – We recommend buying 1,000 shares of stock around $11 on a pull back since it is extended. Target: $13.00. Stop Loss: $9.78.
QQQ- over $131.60, we recommend buying 10 Mar $129 calls (5 DTE) (note: do not pay over 2-3 cents for time value). Stop Loss: $130.78, and then trail under prior day’s low since quick swing trade.
SMH – Sold10 Apr $75/70 bull put spread for $.57/share. Stop Loss: $75.48.
JCOM – Sold 10 Apr $80/75 bull put spread for $.70/share. Stop Loss: $80.88.
STM – Said in Facebook Private Group to short 30-Min. low, not trigger so cancel trade, is sloppy.
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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