Below is a daily chart of Johnson & Johnson (JNJ), $132.72.
Trade: Under $132,10, consider shorting Aug (8/18) $134/138 bear call spread (17 DTE) at mid-point (closed at $.75/share).
Technical Setup: Sell Setup after Breakdown from Double Top daily chart.
Option Strategy: Bear Call Credit Spread (BCS). 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 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 entry with the technical pattern.
Max Gain on Call Spread: Credit received. Cost basis if assigned is lower strike plus Credit.
Stop Loss: $134.02.
Below is a daily chart of Wynn Resorts, Limited (WYNN), $129.34.
Trade: Under $127.35, consider shorting Aug (8/18) $134/144 bear call spread (17 DTE) at mid-point (closed at $1.31/share).
Technical Setup: Breakdown after Bearish Pro Gap and consolidation daily.
Option Strategy: Bear Call Credit Spread (BCS).
Max Gain on Call Spread: Credit received. Cost basis if assigned is lower strike plus Credit.
Stop Loss: $133.32.
Adjustments and Comments on Open Advisory Letter Trades Note: Our Trade Updates are timely posted in a separate Report in the Member’s Area. Please see that document for a current reflection on all Open and Closed Trades since the spreadsheet updates immediately and will always be more current than this e-mail update. Thank you.
NOTE: Please see Master Trader Guidelines for Trading the Open and Gaps in Member’s Area for rules on trade entry, gaps, etc.
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
Chief Options Strategist
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NOTE: Master Trader will show opening and closing prices of all stock and option trades. We do not recommend proper share size for your particular trading style, risk tolerance, or account balance. We urge you to calculate your own share size based on your individualized risk parameters, Trading Plan, and familiarity with the proposed trade strategy and risk.
NOTE: Master Trader and its representatives might have existing positions in these and other trade recommendations before or after suggested herein. Additionally, we often manage them differently for internal purposes based on different risk parameters than noted herein.
