By Dan Darrow

September 21, 2022

Today's Trade Ideas

Symbol: MA

Style: Swing

Strategy: Strangle


Long Oct21 $325 call

Short Oct21 $335 call

Long Oct21 $287.50 put

Short Oct21 $280 put

Action Area: $3.20 - $3.80

Comments: MA is setting up well for a strangle. The turn lower in mid-August and sustained drop over the past month has sent MA back to a critical multi-year level, creating a make-or-break short-term pattern. MA’s slide last week post-CPI drove it down into the 310 level, marking the fifth test of the area this year and the seventh test of the level since the start of 2021. In each instance, MA has found buyers and rebounded quickly, with rallies averaging ~10%+ several weeks later. The stock may be set up for another fast bounce, but in the event it breaks multi-year support, there is open room underneath to the late 2020 low near 280. The Oct21 strangle will be targeting an initial move to 18-20+ points in either direction to begin locking in money, and the swing trade will use a 40-50% net debit loss as a stop. We can institute a technical stop once one side of the position is managed.

Symbol: CHWY

Style: Swing

Strategy: Put Spread


Long Oct21 $32 put

Short Oct21 $27 put

Action Area: $1.35 - $1.70

Comments: CHWY is a bearish trade idea. A disappointing quarter and a disappointing guide from CHWY at the end of August sent the stock spiraling below its key 100day sma, and a several-week bear flag below it has developed. Tuesday’s sharp drop put CHWY right at the bottom of recent support (~32), and while the stock closed green today, it is still susceptible to a near-term breakdown. On a clean move below 32, CHWY should see a drop to 28.70 to fill the 6/17 gap, and the Oct21 put spread will be targeting an initial move to <31 to begin locking in money. The swing trade will have a tight stop above 35.75 (above the 100day sma) or a 40-50% net debit loss, whichever happens first.

On The Radar

GLD reacted more positively to the rate rise and Powell’s press conference this afternoon, but the rally did not repair the broken chart. GLD ran up to the 157 level in the afternoon and pumped the brakes around the 8day ema, both keeping the downtrend intact and leading to a backtest and failure of previous key support . As long as GLD holds below 157.50-158, it is below multi-year support and should continue to grind lower, so we will be patient with the Oct21 put spread roll down. We can lift the next target range to <153.50 now. 

SHOP is on close watch tomorrow. We planned on making a decision on the Sep30 strangle after the FOMC meeting, and today’s action, while bearish, did not lead to a break of the key 30 support level. If SHOP fails to slide below that level during the first hour of trading tomorrow, we will wrap up the remainder of the strangle. Keep an eye out for an update on this trade during the morning.

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 21, 2022