By Dan Darrow

September 15, 2022

Today's Trade Ideas

Symbol: NIO

Style: Swing

Strategy: Long Call

Contracts: Oct21 $22.50 call

Action Area: $1.30 - $1.70

Comments: NIO is a speculative bullish trade idea. Action on Chinese stocks over the past month(s) has not been great, and after some positive signs late in August of an agreement concerning audit disputes, most names steadily rolled right back down. NIO had been out of play since the end of June and didn’t benefit substantially from the audit announcement. The stock sat in a tight range around 20 until the beginning of September, then began to break down as the EV group slid lower. It has come roaring back quickly, though, thanks to an expected big launch for a new vehicle. Excitement is building into the upcoming launch of the ET5, and the stock’s recent rally has set it up well for a large near-term breakout. NIO has built a several-day base under the 200day sma and right at the top of previous resistance (~21.50), and with increasing volume and rising support, the stock is prepping for an imminent move higher. Once past 22, NIO should accelerate into the June high (24.43), and there is open room to run into the high-20s above it. The Oct21 call will be targeting an initial move to 23.25+ to begin locking in money, and the swing trade will use a 40-50% net debit loss as a stop.

 Symbol: AFRM

Style: Swing

Strategy: Put Spread


Long Oct 21 $22.50 put

Short Oct21 $17.50 put

Action Area: $1.45 - $1.80

Comments: AFRM is a bearish trade idea. Disappointing earnings at the end of August completed the reversal that started a few weeks earlier, and by the beginning of September, AFRM was back to where it was before the huge run in July began. After settling into a range under 24, AFRM ticked higher ahead of the CPI release to test the 100day sma and 50day sma, then quickly turned back lower on Tuesday along with the overall market. AFRM is once again below all moving averages, and news that the CFBP will start regulating buy now, pay later companies is a new headwind that should help deliver another leg to the downside. The Oct21 put spread will be targeting an initial move to <20.50 to begin locking in money, and the swing trade will use a 40-50% net debit loss as a stop.

On The Radar

In addition to tomorrow being main monthly Sep16 expiration, it is also quad witching, and that will lead to larger volume during the session. There is only position that is set to expire tomorrow: HACK $52 - $55 call spread roll up. This is the last of several roll ups and has been on watch for the past two weeks for an opportunity to recover premium (which hasn’t happened). The position won’t likely be in play tomorrow, but if options catch a bid, I will pass along an update.

After the strong bounce late last week, action has dried up on SHOP. The stock dipped on Tuesday but recovered yesterday and today, though it is still struggling to clear 50day sma/100day sma resistance. With time beginning to run low on the Sep30 strangle, SHOP needs to either break above 36 to start another leg higher or slide into 30 to set up a potential breakdown soon. The plan will be to give the position a few more sessions to see if SHOP can find direction, and if by Wednesday’s close next week (post-FOMC) it has still not made a move, then we will manage the trade. 

BIIB is on the clock. After tomorrow, there will only be two trading weeks left in September, and that means data should be coming any day now. Volume has been picking up on the options (though spreads are still wider), and more analysts have been weighing in on the expected trading range of the stock post-data. The Oct21 strangle will only be managed before the readout if either the call spread or put spread trades for >$3.50 -$4.00. If that happens, we will scale back risk on that side of the position to balance out the trade again.

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 12, 2022