We are happy to provide an additional bullish income trade courteous of an aspiring Master Trader Options Trader (see email below).
4/2: SHOP – Over $126.28, consider shorting Apr (4/6) $114/106 bull put credit spread (5 DTE) for around closing mid-point of $.65/share (spready so higher risk). Stop Loss: None now.
“Hi Dan,
I am wondering about putting on a long position in SHOP. In the past it has been very volatile, making some wild swings. But recently it has been less volatile and seems to have shown relative strength. Compare the declines in SPY and SHOP from Feb 27 – March 1, 2017. The recent decline in SHOP began March 21 whereas the recent decline in SPY began March 13. But now SHOP has made a speedy decline, that is quite steep. It is now in an area of support, similar to SPY.
Do you think this would be a high probability trade? If yes, can you suggest an option strategy for a longer hold?”
Hi Weekly Options Trader Subscriber,
Like it as a short-term credit spread, I’ll post this in weekly! Agree with your analysis compared to SPY; however, last week’s move was from a Breakout Failure and the markets are still very nervous now. We need more clarity on whether the lows from last week are going to hold or make another move lower to set up a more powerful bottom. Patience is in order, particularly for longer-term trades.
I personally don’t like for long term since the weekly, although still in an uptrend, had a -WRB last week, and the monthly is toppy with a Topping Tail. See:
But if you want long-term, you know our directional bull strategies: bull call debit spread, bull diagonal, covered call, etc. Just recommend you sell options against any longs to lower the cost basis and get positive time decay (theta).
Where would your stop be for a long-term trade? Really needs to be under $100, or at least under $111.
Hope that helps!
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Trading the Pristine Method — Origin and End
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