Rocket Equities & Options Report 08-03-22
New Bearish SPY Options Trade - August 3, 2022
The S&P sits up almost 42 points, trading at 4,135, as the 10 year has crashed almost 2 and a half points in the last 24 hours to hit a yield of about 2.80% from almost 2.55% just yesterday.
The VIX is at a very reasonable 22.27, approaching some of the lower levels it has traded at since January.
Crude is trading at under $92, approaching lower levels of support recently.
We are going short the SPY with a bearish put spread in the SPY. You can also just short the market, but I like the defined risk of an options trade right now with the VIX back to its lower trading area.
We are going to essentially start with a half position by purchasing one contract pair now, and with the plan to purchase an identical 2nd contract pair should the ES rise to about 4,200 anytime ahead of next week's CPI print, which would bring the SPY to the $417 range.
We are buying an SPY put spread that expires next Friday, August 12th from the 402 to 390 range. The SPY is currently trading at 412.01. This will cost us about $1.40 or $140 of risk.
Buy the 402 Aug 12th SPY Put (Trading at $1.89)
Sell the 390 Aug 12th SPY Put (Trading at $0.53)
This results in a net debit (cost) of about $1.40 right now per contract pair or $140 of risk. Our max profit is $1,060 if the SPY closes below 390 next Friday. We won't necessarily hold this until expiration.
We plan to add a 2nd contract if the SPY rises to the recent early June highs prior to next week's CPI numbers. We also get exposure to the jobs number Friday morning.
There is lots of optimism in this market as we come out of a huge week of earnings for the tech stocks, and a Fed that said they will wait for the data. Well, we get a big start on that data with jobs on Friday and CPI next week, and my guess is that the market has priced in more of the optimism than appropriate when the data has to back up the Fed's dovishness, and with a VIX at reasonable levels there is a real chance that the data still pushes the Fed to be fast and furious with the hikes.
Stay tuned for updates!
The VIX is at a very reasonable 22.27, approaching some of the lower levels it has traded at since January.
Crude is trading at under $92, approaching lower levels of support recently.
We are going short the SPY with a bearish put spread in the SPY. You can also just short the market, but I like the defined risk of an options trade right now with the VIX back to its lower trading area.
We are going to essentially start with a half position by purchasing one contract pair now, and with the plan to purchase an identical 2nd contract pair should the ES rise to about 4,200 anytime ahead of next week's CPI print, which would bring the SPY to the $417 range.
We are buying an SPY put spread that expires next Friday, August 12th from the 402 to 390 range. The SPY is currently trading at 412.01. This will cost us about $1.40 or $140 of risk.
Buy the 402 Aug 12th SPY Put (Trading at $1.89)
Sell the 390 Aug 12th SPY Put (Trading at $0.53)
This results in a net debit (cost) of about $1.40 right now per contract pair or $140 of risk. Our max profit is $1,060 if the SPY closes below 390 next Friday. We won't necessarily hold this until expiration.
We plan to add a 2nd contract if the SPY rises to the recent early June highs prior to next week's CPI numbers. We also get exposure to the jobs number Friday morning.
There is lots of optimism in this market as we come out of a huge week of earnings for the tech stocks, and a Fed that said they will wait for the data. Well, we get a big start on that data with jobs on Friday and CPI next week, and my guess is that the market has priced in more of the optimism than appropriate when the data has to back up the Fed's dovishness, and with a VIX at reasonable levels there is a real chance that the data still pushes the Fed to be fast and furious with the hikes.
Stay tuned for updates!
Options Trades:
Bearish Put spread in SPY Aug 12th expiration 402-390 for $1.40.
Equity portfolio:
We bought MCD at $216.91 and closed out our position at $249.84 for a $32.93 or 15.18% profit.
Bearish Put spread in SPY Aug 12th expiration 402-390 for $1.40.
Equity portfolio:
We bought MCD at $216.91 and closed out our position at $249.84 for a $32.93 or 15.18% profit.
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