By Dan Darrow

December 05, 2022

Today's Trade Ideas

Symbol: PYPL

Style: Swing

Strategy: Put Spread


Long Jan20 $72.50 put

Short Jan20 $62.50 put

Action Area: $2.85 - $3.35

Comments: PYPL is a bearish trade idea. A soft forecast on their early November earnings report knocked PYPL down through key support and into the low-70s, but the cooler-than-expected CPI a few sessions later helped the stock recover quickly. PYPL’s rebound stalled right at the 200day sma, though, and it has been steadily sliding lower for the past few weeks, with an important bearish development taking place recently. The 80 level was a key area of support on the stock in October, but once it slipped back below it at the end of November, it has struggled to reset above it. The 8day ema and 20day sma are providing overhead pressure on PYPL now, and the turn lower late last week is setting up a near-term breakdown and a retest of the earnings day low (71.16), with a possible retest of the year-to-date low underneath (67.58). The Jan20 put spread will be targeting an initial move to <71.25 to begin locking in money, and the swing trade will use a 30-40% net debit loss as a stop.

Symbol: SI

Style: Swing

Strategy: Strangle


Long Jan20 $30 call

Short Jan20 $35 call

Long Jan20 $17.50 put

Short Jan20 $12.50 put

Action Area: $1.90 - 2.30

Comments: SI is a candidate for a speculative volatility strategy. The FTX collapse has led to contagion across the Crypto space, with digital assets bank SI caught up in the hurricane. As a lender to FTX (and other Crypto companies that have collapsed), SI has been hit hard over the past month on top of the steep drop from 100+ in August. The stock sank quickly into the mid-20s two weeks ago, and it has consolidated in a tight range below 30 since then. The 8day ema joined last week, and pressure has been building on the downside following multiple recent cautious/bearish reports and increasing short interest. While the stock looks set up for a near-term breakdown, Bitcoin has been making progress off its recent low, and if the Crypto space begins to recover, SI could catch a bid along with it. The Jan20 strangle will be targeting a move of $7+ in either direction over the next month once the stock resolves the current consolidation. The trade will use a 30-40% net debit loss as a stop to start, with a technical stop coming once one side is managed.

On The Radar

MS will be on close watch tomorrow morning. Recent strength set up a key breakout on MS as it pushed through monthly resistance, but Banks slid Friday following the jobs report, and they were under pressure again this morning, with MS closing back below 90. The stock finished weak and near the tight technical stop (88.75), so we will have to keep an eye on it early tomorrow. If MS doesn’t bounce off the open or during the morning, there is a chance it loses the 20day sma and upper support around 89, changing the bullish thesis and giving us a cue to exit the Jan20 call spread.

Something has to give on CVNA soon. After being pummeled into earnings and after earnings, CVNA has attempted to bounce a few times but has been unable to clear 8day ema and 20day sma resistance. The stock has found buyers around 6.50-6.75 on multiple occasions, but an increasingly tight pennant is forming on the chart as the two key moving averages grind lower. A decisive breakdown/out should lead to a sharp, quick move, which still lines up well for the Dec30 strangle. With the position skewed more to the bear side, though, we are going to place a stop at 8.50 on the Dec30 put spread. If CVNA clears the 20day sma, we will keep the call spread open and ride that higher

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 05, 2022