Below is a daily chart of SPDR S&P 500 ETF (SPY), $246.72.
Trade: Provided SPY not trading over $247 around 3:45 ET, consider buying Aug (8/23) $249/245 bear put spread (8 DTE) at mid-point (currently $1.81/share).
Technical Setup: Sell Setup at Major Resistance daily.
Option Strategy: Bear Put Spread (BPS). A defined risk strategy where you make the maximum profit if the stock closes below the shorted put strike at expiration. We buy bearish puts and then sell a put strike price lower where the price pattern suggests that the stock will not close under at expiry to reduce the cost of the long put and generate time decay.
The return on investment (ROI) is the Gain divided by the Debit, which is the maximum loss. The break-even is the higher strike price plus debit paid. Considered a mildly bearish strategy since we are not buying puts or shorting stock and willing to cap our gains in exchange for gain from time decay.
Stop Loss: $248.32.
Below is a daily chart of CSX Corporation (CSX), $50.63.
Trade: Under $50.50, consider buying Sep (9/15) $55/48 bear put spread (30 DTE) at mid-point (currently $4.13/share).
Technical Setup: Sell Setup at Major Resistance daily.
Option Strategy: Bear Put Spread (BPS). A defined risk strategy where you make the maximum profit if the stock closes below the shorted put strike at expiration. We buy bearish puts and then sell a put strike price lower where the price pattern suggests that the stock will not close under at expiry to reduce the cost of the long put and generate time decay.
The return on investment (ROI) is the Gain divided by the Debit, which is the maximum loss. The break-even is the higher strike price plus debit paid. Considered a mildly bearish strategy since we are not buying puts or shorting stock and willing to cap our gains in exchange for gain from time decay.
Stop Loss: $51.42.
Below is a daily chart of Akamai Technologies, Inc. (AKAM), $46.03.
Trade: Under $45.90, consider buying Sep (9/15) $50/45 bear put spread (30 DTE) at mid-point (currently $3.39/share). NOTE: Or you can buy the $50 put and leg into spread after anticipated drop.
Technical Setup: Breakdown after bearish consolidation from Bearish Pro Gap daily, downtrend all time frames.
Option Strategy: Bear Put Spread (BPS). A defined risk strategy where you make the maximum profit if the stock closes below the shorted put strike at expiration. We buy bearish puts and then sell a put strike price lower where the price pattern suggests that the stock will not close under at expiry to reduce the cost of the long put and generate time decay.
The return on investment (ROI) is the Gain divided by the Debit, which is the maximum loss. The break-even is the higher strike price plus debit paid. Considered a mildly bearish strategy since we are not buying puts or shorting stock and willing to cap our gains in exchange for gain from time decay.
Stop Loss: $48.22.
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
Chief Options Strategist
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