Below is a daily chart of PowerShares QQQ ETF (QQQ), $130.28.
Trade: Under the 90-Min. low, we recommend buying 10 Apr $132.5 puts (29 DTE) puts (currently $3.20 x .22/share).
Technical Setup: Bearish retracement into –WRB daily chart and bearish M Top on hourly now (showing that the retracement is tired).
Option Strategy: Long Puts. Put buyer pays a premium for the right to sell the underlying asset (stock) at a specified price (strike) for a specified period of time (expiry). Long puts are used to capitalize on downside market movements with less cost (leverage) and to limit risk (to debit paid). One (1) contract represents the right to buy 100 Shares. Potential Gain is Strike Price – Premium paid (i.e., break-even point). Max Loss is Premium paid.
Stop Loss: $132.52 (very wide for now, but will use other options as partial hedge if breakdown fails).
Adjustments and Comments on Open Advisory Letter Trades
KBH – Purchased 10 Jul $15 calls (136 DTE) and sold the Apr 19 calls (45 DTE) for a net debit of $2.95/share. Move stop loss break even. Note: Holding over earnings (3/23) is higher risk.
CSX –Bought 10 Apr $50/46 bear put spread for $2.18/share. Closed half at $2.90/share, move stop break even. Note: Close before 4/10 earnings.
WFT – Sold 10 Apr $6 naked puts spread for $.19/share. Move stop loss $5.61.
OIH – Sold 10 Apr $29/27 bull put spread for $.24/share. Didn’t get as much net credit as desired so bid $.10/share to close. Stop Loss: $29.28.
WFM – Trade #1: Sold 10 Apr $28 naked puts for $.45/share. Closed $.32 for $130 gain. Trade #2: Sold 10 Apr $29/27 bull put spread for $.58/share. Closed $.50 for. $70 gain.
VLO – Sold 10 Apr $65/60 bull put spread for $.44/share. Stop Loss: $65.28.
TTWO – Sold 10 Apr $60/65 bear call spread for $.72/share. Mid-point to close is $.55/share, move stop loss break even.
AMZN – Sold 10 Apr $825/815 bull put spread for $1.10/share. Unfortunately got caught in this bullish trade before market selloff. Mid-point to close is $1.93/share so not catastrophic in light of huge drop. Try to close break even on bounce with market uncertainty and maintain stop loss under $839.
KSS – Trade #1: Sold 10 Apr $41.5/45 bear call spread for $.42/share. Covered half at $.21/share, move stop loss break even. Trade #2 – Shorted 1,000 shares of stock at $38.19. Covered half at $37.19, stopped back half break even for average $500 gain.
WYNN – We are monitor for potential breakout on the weekly and monthly charts.
ADI – Trade #1: Sold 10 Apr $85/90 bear call spread for $.60/share. Trade#2: We recommend shorting 1000 shares of stock under $81.65 for swing trade. Stop Loss: $84.42.
CRM – Sold 10 Apr $85/90 bear call spread for $.49/share. Stop Loss: $84.82.
BBY – Sold 10 Apr $47/50 bear call spread for $.29/share. Stop Loss: $46.52.
COST – Sold 10 Apr $172.5/177.5 bear call spread for $.66/share. Stop Loss: $170.32.
ABT – Under $44.59, we recommend buying 10 Apr $66.5 puts (30 DTE) for mid-point (currently $2.21 x 2.25/share, paying no more than $.24/share time value). Note: earning 4/18. Stop Loss: $45.86.
MO – Trade #1: Shorted 1,000 shares of stock under $75.15. Nice bear gap and morning weakness, close half for $1.00 gain. Trade #2: We recommend selling 10 Apr $77/79 bear call spread for $.37/share. Move stop loss break even.
FCX – Over $13.16 (the entire consolidation area), we recommend selling 10 Apr $12/10 bull put spread for the mid-point (currently $.23/share). Stop Loss: $12.08.
EWP -We recommend selling 10 May $26 naked puts ((57 Days to Expiration (DTE)) at a limit of $.60/share. Note: we would not typically trade this illiquid stock but our strategy is acceptable based on our outlook. Stop Loss: None, we would love to own EWP at a Cost Basis of $28.25 if assigned.
CALL – Over $8.85, we recommend buying 1000 shares of stock. Target: $10 – 12 (first target $10 – $10.50). Stop Loss: $7.79.
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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