Below is a daily chart of United Continental Holdings, Inc. (UAL), $74.25.
Trade: We recommend selling 10 Mar $78.5/81.5 bear call spread (17 DTE) for $.40/share .
Technical Setup: Reversal at Major Resistance on daily and weekly charts.
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 lower strike price less 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.
Stop Loss: $77.22.
Below is a daily chart of Check Point Software Technologies Ltd. (CHKP), $98.95.
Trade: Under $98.10, we recommend buying 5 Mar $100 puts (17 DTE) at mid-point (currently $2.05 x 2.30/share).
Strategy: Rolling over from extended high consolidation, Climactic Sell Setup weekly chart.
Max Gain: Bearish swing trade looking for retracement.
Max Loss: Debit paid.
Stop Loss: $101.22.
Adjustments and Comments on Open Advisory Letter Trades
VRX – Sold 10 Apr $12.5/7.5 bull put spread for $.470. Note: Even with earnings gap down, because of our strategy in selling OTM put spread, the theory of time decay still made the trade profitable (current mid-point to close is $.24). Move stop loss under day’s low to protect gains.
SPWR – Purchased at $7.89. Note: We are going to approach this as a long-term Core holding because of the bullish alignment of multiple time frames; thus, please note that holding over earnings is higher risk. Target: $11.00 – 14.00. Had great move so move stop loss to $7.89.
SWKS – Sold 10 Mar $90/85 bull put spread for $450. Pulled in last week but looking good. Stop Loss: $90.48.
DOW – Sold 10 April $57.5/52.5 bull put spread for $550. Mid-point to close is $.26/share, so that is 50% of Max Gain in a few days because of the nice move. Cover half here. For back half, bid to close at $.10 and move stop loss to break even.
XLU – Sold 10 Apr $48 puts for a net credit of $630. Mid-point to close is $.23/share, so that is 65% of Max Gain in a few days because of the nice move. Cover half here at $.23/share for $200 gain on 5-lot. For back half, bid to close at $.10 and move stop loss to break even.
BHI – Sold 10 Mar 62/65 bear call spread for $520. Nice bearish engulfing, move stop loss closer of break even or $61.52.
JWN – Sold 10 Mar $42.5/37.5 bull put spread for $230. Stop Loss: $42.18.
RH – Sold 10 Apr $25/20 bull put spread for $400. Stop Loss: $24.88.
LRCX – We recommend two trades depending on your bullishness. Trade 1: Sold 10 Mar $115/105 bull put spread for $800. Trade 2: Bought 5 Mar $110 calls for $9.15/share. For the Long Call, we recommend selling the Mar $120 calls against it at mid-point (trading at $1.70 x 1.95) to convert to Bull Call Spread. Stop Loss: $115.48.
UA – Sold 10 Apr $20/22.5 bear call spread for $550. Stop Loss: $20.26.
SALT – Sold 10 Jun $5 puts for a net credit of $500. Quote now is $.20 x .40 so move stop to break even and place GTC limit to close at $.10/share for 80% max profit.
GPRO – Sold 10 Apr $8/6 bull put spread for $330. Stop Loss: $8.68.
HUM – Sold 10 Apr $195/185 bull put spread for $1,000 (current mid-point). Stop Loss: $198.88.
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
Follow Greg on Twitter and StockTwits to get real-time updates:
Twitter: @GregCapra
Stocktwits: Greg_Capra
