By Dan Darrow

October 03, 2022

Today's Trade Ideas

Symbol: UNH

Style: Event

Strategy: Call Spread


Long Oct21 $525 call

Short Oct21 $530 call

Action Area: $1.80 - $2.35

Comments: UNH is a ramp into the report candidate. Health Insurance names have held in well throughout recent market-wide weakness, and UNH’s modest pullback over the last month has put it into key uptrend support. The stock slid into the 200day sma early last week and has found buying interest at the key moving average every session since. The 200day sma has marked the low on UNH a handful of times since mid-2020, and the recent slide into support comes right ahead of October earnings for the company (10/14). Having turned in a solid print last quarter and with peers acting strong, UNH is set up well for a rally into earnings next week, and the Oct21 call spread will be targeting a move higher over the next several sessions to lock in money or reduce risk. The trade will use a 30-40% net debit loss as a stop.

Symbol: UNG

Style: Swing

Strategy: Call Spread


Long Nov18 $23 call

Short Nov18 $28 call

Action Area: $1.25 - $1.65

Comments: UNG is a bullish trade idea (with a tight stop). Extreme volatility on Natural Gas (UNG) shows no signs of diminishing. UNG followed up a 100%+ rally from March to June with a 40%+ correction into early July. It found buyers at the key 200day sma on several tests on that drop, then quickly rebounded to put in a new 52-week high a month later. Now it has seen another dramatic correction, with the slide that started in late-August knocking it lower by >30%, and the ETF is probing the key 200day sma again. If UNG can hold this moving average similar to the action in early July, it should see a fast bounce into the high-20s (20day sma, 100day sma), setting up an interesting short-term bullish trade opportunity. The Nov18 call spread will be targeting an initial move to 25.50 to begin locking in money, and the swing trade will have a tight stop below 21.50 ( a definitive break of the 200day sma) or a 30-40% net debit loss, whichever happens first.

On The Radar

ATVI needs a bounce soon. The move to the low-80s in August came close to triggering a break of the post-deal announcement range, but it ended up failing, and the stock has now rolled back to the June low. With ATVI below all moving averages and right above the June low (73.71), it will need to firm up soon, or it could trigger another leg lower quickly. Money has already been removed from the longer-term Jan20 call spread, but if the stock loses 73, we will need to exit the remainder of the trade. 

BIIB is beginning to show signs of stabilizing above 260. Closing the bull portion of the strangle early into the big pop on Wednesday was timely, with the stock sliding later that session and Thursday and Friday as well. While it did trade into the 250s on Friday, BIIB managed to bounce to finish back in the high-260s, and including today’s dip, it marks three consecutive sessions where buyers showed interest around 260. The plan for BIIB now will be to give the stock a few more sessions to see if it continues to hold in this area, and that should allow the fast-moving 8day ema to catch up underneath to provide a near-term bull setup. When we initiate a new bull trade, we will close the remainder of the Oct21 strangle.

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 October 03, 2022