August 15, 2022

Today's Trade Ideas

Symbol: BITO

Style: Swing

Strategy: Strangle


Long Sep16 $15 call

Short Sep16 $18 call

Long Sep16 $14 put

Short Sep16 $11 put

Action Area: $1.25 - $1.55

Comments: BITO is setting up well for a volatility strategy. BITO fits the bill of a make-or-break pattern that we are always on the hunt for. Since gapping under 15 in mid-June, BITO has repeatedly tested and failed to clear 15, including several attempts alone last week. Dips have been increasingly shallow over the past several weeks, however, as the rising 20day sma provides higher support on the ETF. With the 20day sma close below now (14.35), BITO has formed a tight month-long wedge, and a resolution should be imminent. On a clean break of 15, BITO has a sizable unfilled gap to 17.95 from 6/10, while a break of the 20day sma should start a sustained drop to the next key support level around 12-12.50. The Sep16 strangle will be targeting a move of $1.50+ in either direction over the next couple of weeks, and the trade will use a 40-50% net debit loss as a stop to begin with.

Symbol: OKTA

Style: Swing/Event

Strategy: Call Spread


Long Sep16 $110 call

Short Sep16 $120 call

Action Area: $3.20 - $3.80

Comments: OKTA is a bullish trade idea. We played OKTA recently for a sympathy trade on a busy week of Cybersecurity earnings, and the short-term strategy worked well at the time. The stock has made little progress since the trade was closed, though, and that has created an interesting short-term setup. OKTA has built a tight base above 100 over the past two weeks, with recent resistance around 109-110 and the 100day sma. The stock had a strong session today to finish within striking distance of that moving average, and with the sector continuing to grind higher, OKTA looks ready for a breakout. Having turned in a strong beat-and-raise in June, OKTA should build momentum as earnings come into view (8/31) and it moves out of the recent consolidation. The Sep16 call spread will be targeting an initial move to 111.50+ to begin locking in money, and the swing trade will use a 30-40% net debit loss as a stop (because this is a short-term strategy).

On The Radar

DKNG has had an impressive few weeks. A breakout pre-earnings started momentum building, and a strong report kept the rally going, with more buyers stepping in late last week. DKNG closed above 20 on Friday for the first time since early April, and it came within $.01 of the 200day sma today. We have already rolled up Nov18 call spread a couple of times, but it may make sense to remove more risk and roll up again if the stock begins to stall around the 200day sma. A pause/consolidation may be due after the long run, so we will be watching to see how DKNG acts tomorrow (and Wednesday) as it probes the key 200day sma.

If there is one thing we have learned on ABBV in August, it is that the 200day sma is a significant level. Since dropping into the 200day sma on its report on 7/29, ABBV has attempted to reset above the 200day sma eight times without success. Another failure today made for a choppy session, though the stock did bounce in the afternoon to close near the key moving average. The Sep16 put spread revolves around the stock breaking down as it hovers under the 200day sma. With the moving average close above (and the technical stop relatively tight above that at 143.50), we will need to pay close attention to the stock over the next couple of days. We do not want to let ABBV gain momentum higher if it begins to rally through recent resistance. 

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 August 15, 2022