By Dan Darrow

September 28, 2022

Today's Trade Ideas

Symbol: RIVN

Style: Swing

Strategy: Call Spread


Long Dec16 $40 call

Short Dec16 $50 call

Action Area: $1.90 - $2.45

Comments: RIVN is a longer-term bullish trade idea. Partnership news with Mercedes started a big run on RIVN earlier in September, leading to a retest of the August high and key 40 level. Unfortunately for the stock, the weak market action following the CPI reading prevented it from breaking out, and the past two weeks, it has been swept up in the selling, similar to other Green Energy/EV names. RIVN dropped under 32 last Friday to test the 100day sma and found buyers at the moving average, similar to the slide in late August. While it’s only had a modest bounce this week, it has shown signs of stabilizing above 33, setting the stage for a near-term leg up once the overall market finds a floor. With production increasing and positive sentiment around the new Mercedes partnership, RIVN should turn into a go-to name in the EV space, and a retest of 40 over the next couple of months seems likely, with a possible large breakout above it. The Dec16 call spread will be a longer-term strategy targeting an initial move to 38.50+ to begin locking in money. The swing trade will have a wider stop down at 29.75 or a 40-50% net debit loss, whichever happens first.

 Symbol: TWLO

Style: Swing

Strategy: Call Spread


Long Nov18 $75 call

Short Nov18 $85 call

Action Area: $3.30 - $3.90

Comments: TWLO is a bullish trade idea (with a tight stop). TWLO has an interesting reversal pattern forming following a long stretch of weakness. Lackluster earnings and a market-wide correction in August dragged TWLO down through previous support around 80, and it led to a sustained slide to ~65 by early September. The stock rebounded ahead of the CPI release and pushed higher into the 50day sma shortly after due to a layoff announcement (their goal is to improve operating margins). The rally into that moving average marked the high of the move, with a pullback last week to the high-60s post-FOMC. TWLO has since firmed up, resetting the 8day ema and 20day sma today and forming a higher low versus the early September low. There is a path to the 50day sma above, and if it can clear that moving average now, it will mark a higher low, higher high reversal pattern, with possible room to the 90s after. The Nov18 call spread will be targeting an initial move to 78+ to begin locking in money, and the swing trade will have a tight stop below 65 or a 40-50% net debit loss, whichever happens first.

On The Radar

We are going to tighten the stop on AFRM. A drop into the 20 level last week gave a shot to roll down the initial Oct21 put spread, and a move into the high-teens shortly after provided another opportunity to scale back risk on the trade. AFRM sat in a lower range under 20 through Tuesday, seemingly setting the stock up for another leg down, but a market-wide bounce today helped the stock rebound. AFRM managed to reclaim the 8day ema during today’s session, so we will tighten the stop on the remainder of the position to 22.50 moving forward. That would be a reset of the 20day sma and would change the near-term bearish pattern. 

ICPT is another Bio we have been sitting in waiting for near-term data. The company has guided to a Q3 release of the Nash data, and with September wrapping up on Friday, the window for news is drawing to a close. The Oct21 options have been busy recently, with bullish positioning active the last few sessions, so it does appear that traders are still anticipating the data before Oct21 expiration. The original strangle strategy was broken up (the bear portion was closed for a gain), so the current call spread should be viewed as a more speculative, one-sided play into the release.

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 September 28, 2022