By Dan Darrow

December 04, 2022

Today's Trade Ideas

Symbol: XBI

Style: Swing

Strategy: Call Spread


Long Jan20 $86 call

Short Jan20 $94 call

Action Area: $2.80 - $3.30

Comments: XBI is a bullish trade idea. Biotech kicked off a catalyst-filled stretch this past week with the closely-watched CTAD conference, and the sector will consistently be in the news over the next month and a half as multiple key data readouts and a couple of big conferences (ASH and the JPM Healthcare conference) take center stage, not to mention the possibility of more M&A. XBI has been treading water in a sideways range since mid-September as it fluctuates above/below the key 200day sma, but a solid past week of action has it comfortably above that moving average, and upcoming news could start a long-awaited breakout to the upside. With seasonality in play, XBI has an open path to 89-90 on a clean break of 85, and the August high near 95 is possible if momentum kicks in. The Jan20 call spread will go out through the JPM Healthcare conference in early January and will be targeting an initial move to 88+ to begin locking in money. The swing trade will use a 30-40% net debit loss as a stop.

Symbol: TLT

Style: Swing

Strategy: Put Spread


Long Dec30 $107 put

Short Dec30 $102 put

Action Area: $1.45 - $1.85

Comments: TLT is a fast-developing bearish trade idea. Clearing the key 8day ema and 20day sma on the November CPI print started a major break of the several-month downtrend on TLT. It continued higher the following week to the 50day sma, paused briefly at it and the 100 level, then turned higher again two weeks ago to start the next leg up. The sharp rally Thursday and Friday sent TLT into the 100day sma for the first time since August, and it is setting up a near-term pause/pullback on the recent run. The 100day sma marked the high of the July/August rebound, and the moving average should act as resistance on the first test now. The Dec30 put spread will be targeting an initial move to <104.25 to begin locking in money, and the swing trade will have a tight stop above 107.75 or a 30-40% net debit loss, whichever happens first.

On The Radar

This week was the warmup for the main event in December. Powell’s speech on Wednesday sparked a huge wave of buying across the market, and it put QQQ and SPY at their best levels since early September before momentum cooled. With the latter closing above the key 200day sma Friday and the former near the key 100day sma, the bulls still remain in control for now, but the massive volatility seen on Wednesday is a sign of what to expect over the 48 hour stretch on 12/13-12/14 (CPI reading and the FOMC rate decision). This coming week may be a choppy one uness indices resume their climb quickly on Monday/Tuesday, but our focus will be reducing some risk and locking in some trades as the big events get closer. 

Something had to give on ENPH, and it did on Friday (finally!). The stock recovered from the red open quickly, and it broke through key recent resistance on a strong volume surge in the morning. The stock continued to run during the day into the high-330s, sending the Dec16 call fly nicely into the money. It will be on close watch tomorrow following the strong action on Friday. Flys can be tricky when it comes to exits, so if ENPH starts to push into the low-to-mid 340s, it may make sense to book the trade before momentum can accelerate into the 350s or 360s and threaten the top of the fly. Keep an eye out for an update on this one soon.

ZM is on premium salvage watch this coming week. Earnings didn’t deliver a big enough move to reward the Dec16 options, and the stock struggled to find direction this past week, leading to a choppy few sessions where premium contracted on short-term contracts. With both sides of the strangle further out of the money now, we will be watching for either a move to ~70-71 or 80+ for an opportunity to close out the position. We gave the trade a little extra room because it was rolled up prior to earnings, but the lack of movement post-print means it is time to focus on recovering premium. 

Open Positions

* The following Open Positions pertain to the Options In Play trade ideas from this and previous editions. Disclosure of the Trader Co-Author’s actual portfolio holdings, as of the date of each publication, is made below under "Trader Author Portfolio Holdings.".

Trader Author Portfolio Holdings

**As of 4pm ET December 02, 2022