By Dan Darrow

October 06, 2022

Today's Trade Ideas

Symbol: NTNX

Style: Swing

Strategy: Long Call

Contracts: Nov18 $22.50 call

Action Area: $1.60 - $2.00

Comments: NTNX is a bullish trade idea. NTNX had a strong bounce-back report at the end of August following a surprisingly weak print in May. The beat and raise sent NTNX soaring into the low-20s to start September, and it led to a steady grind higher into the 200day sma. The stock ran out of gas around the key moving average and rolled over later in the month to the 20 level. Buyers stepped in nicely to prevent a deeper slide into the earnings gap, and NTNX has been steadily grinding higher again over the past two weeks, with today’s rally sending it above the key 200day sma to trigger a near-term breakout. On a clean break and hold of 22.50, NTNX should build momentum for a run to 25 (large support from earlier in 2022), and the Nov18 call will be targeting an initial move to 24+ to begin locking in money. The swing trade will use a 40-50% net debit loss as a stop.

Symbol: MBB

Style: Swing

Strategy: Put Spread


Long Nov18 $92 put 

Short Nov18 $88 put

Action Area: $1.15 - $1.45

Comments: MBB is a bearish trade idea. MBB is not usually a name we focus on (we have never traded this in the past), but with credit markets extremely volatile at the moment, an interesting short-term pattern has emerged. Selling on MBB began to accelerate throughout September as the volume increased, with the break of the June low (94.32) leading to a sharp slide to the 90 level by the end of the month. A fast snap-back bounce put MBB into the 8day ema, and the moving average has turned into a sizable area of resistance over the past week. With the 20day sma close to joining overhead and momentum still on the downside, MBB looks set for a turn lower, and there is a clear gap at 91.03, which will act as the initial target for the Nov18 put spread. The swing trade will have a tight stop above 93.25 (above the 20day sma) or a 40-50% net debit loss, whichever happens first.

On The Radar

Tomorrow is weekly Oct07 expiration, and there are no positions set to expire. The monthly jobs report is due out before the open, though, and that could lead to a volatile morning, so be on the lookout for early updates!

Speaking of the jobs report, we are about to enter a busy stretch of economic and company-specific news releases (the CPI reading and earnings next week), and the recent rally has put QQQ and SPY above their 8day ema, setting up a critical few sessions. Having broken that moving average in early September only to fall quickly back below it post-CPI, we should get more clues as to how strong this bounce is soon. The Nov18 put spread hedges have moved out of the money following the rally this week, but both still provide coverage if QQQ and SPY break their recent low, so there is no need to adjust them yet. If the rally continues to build next week pre-CPI (10/13), then we may adjust the hedges higher.

UNH had a great session yesterday as it rallied into the high-520s and the 50day sma to give a shot to lock in money on the Oct21 call spread, but today it rolled over to erase the entire pop. This strategy is a ramp into the report, and because it has a short timeframe, we will use a tight stop on the roll up. Having locked in some gains yesterday, the plan will be to use a 30% debit stop loss on the current Oct21 call spread as this would be breakeven on the overall trade.

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 06, 2022