By Dan Darrow
December 15, 2022
Today's Trade Ideas
Long Feb17 $10 call
Short Feb17 $13 call
Long Feb17 $8 put
Short Feb17 $5 put
Action Area: $1.15 - $1.45
Comments: SNAP is at a make-or-break level, setting it up nicely for a volatility strategy. Earnings have been a huge catalyst for the stock the past several quarters, but major stock-moving events have been fewer and farther between mid-quarter. After sinking sharply again on its October report, SNAP snapped back quickly the following two weeks to erase most of the losses. While it attempted to clear monthly resistance and the 100day sma in mid-November when it ticked up past 11.50, the rally did not hold, and now it is back below 10 and under all moving averages. The 9.25-9.50 level was key support several times since July, and now that it is underneath it, there is a clear path to the October low (7.33). Bounces off recent support have been sizable, though, with every rally carrying the stock above 11.50. With a make-or-break pattern forming, SNAP is set up well for a strangle, and the Feb17 options will be targeting a move of $1.25+ in either direction to start locking in money. The options will go through the first quarter earnings report and should hold onto their value well, but we will still use a 30-40% net debit loss as a stop.
Strategy: Long Put
Contracts: Jan20 $18 put
Action Area: $1.20 - $1.50
Comments: PARA is a fast-developing bearish trade idea. Streaming is a tough place to be right now. Lots of Streaming-related companies have been battered and bruised over the last few months, with the recent bright spot NFLX today falling sharply following an article concerning their ad-tier rollout. PARA was also under pressure today, and the weak close sets it up for further downside. PARA lost the round 20 level at the end of September, and it has struggled to reclaim the level since then. There has been support around 18 since mid-November, but the sharp slide today put it below that area and under all near-term moving averages. A clean breakdown should start momentum building for a retest of the November low (15.29), and the Jan20 put will be targeting an initial move to <16.75 to begin locking in money. The swing trade will use a 30-40% net debit loss as a stop.
On The Radar
Tomorrow is Dec16 expiration and quad witching, setting the market up for a busy finish to the week. There are two positions that will be expiring: ZM $95 - $100 call spread and VKTX strangle ($5 call, $3 put). There is still a chance that the VKTX options may be in play if MDGL reports data tomorrow, but if not, it will be tough to recover much premium from the contracts. If there is no news premarket on MDGL, the plan should be to close the VKTX options quickly off the open to salvage whatever premium is possible.
ALLY refuses to break down. Another quick reversal lower on Wednesday led to another test of the 25 level today, and while the stock looked close to clearing recent support during the morning when it sank to 24.50, buyers stepped in to prevent further damage. The stock still closed red and under all moving averages, so the momentum remains on the downside, but if ALLY doesn’t crack 24.50 soon, we may need to adjust the Jan20 put spread.
UPST is on a path back to its low. Bounces continue to be shallow on UPST, and the stock has failed to reset any moving average support on multiple occasions, and now it is starting to slide close to the November low (17.06). With momentum on the downside and the stock a prime target for tax loss selling (it’s down significantly year-to-date), a move below 15 looks to be coming soon. The Jan20 put spread roll down will be looking for a move under that level to lock in more money.
Trader Author Portfolio Holdings
**As of 4pm ET December 15, 2022