This one is a pretty decent setup to trade to the long side, provided the price comes back to support. See chart:
The highlighted area is where price stayed at for a significant period of time. If the price ever comes back to that level, we should see some form of support. The one problem I see is the lack of volume when it was in that 575-600 range, but the trade should work. If the stock breaks below that, it would be prudent to take a loss and possibly flip to a short if you're comfortable with that.
I'm currently long LVS but I sold Feb 10 calls against it when I saw price stalling. I'll probably uncover half around that area. My overall price basis is nice since I got in near the bottom and have been selling calls against it for a while now.
I mentioned earlier today a bearish spread on RTH that you could implement, but there were some near-term risks. Since you were selling puts there would be some directional risk until the theta (time-decay) caught up with you. So instead, I picked out an ATM call vertical that I sold:
Buy RTH Feb 80 Call 3.55
Sell RTH Feb 75 Call 6.30
Here's the risk profile for a single vertical:
This put me at a $275 credit per vertical opened, and my total risk is 225. You'll notice when you do a lot of vertical spreads is the relationship between risk/reward and the statistical percentage of success. Since my risk/reward is near parity, that means I have about a 50% statistical chance of success with this trade. Since I believe that the etf is headed down in the next month or so, I felt there was an edge there to take and my odds were much better.
Risk management is pretty straightforward: your risk is capped, but I'll exit the position if a short squeeze commences. It will be a discretionary exit based on momentum and the volume behind the move. It's also a good portfolio hedge if you've got a consumer-heavy portfolio.
This is a play I'm looking to get into today, provided we can get a little bounce into the open. The idea is to be moderately bearish in RTH, a retail etf, for the intermediate term, but I'd like to be protected against any kind of short squeeze that may occur. Here's the play:
Buy Feb 75 Put
Sell Feb 70 Put
If filled in the middle of the bid ask, it puts you in a .35 credit, which gives you effectively no upside risk. There is downside risk, but it's way out below 65. You could hedge against that by buying a different set of puts or an OTM calendar spread or something else like that. Here's the risk profile:
There may be some difficulty in getting filled so the actual price may be different. I'm also considering legging into it if I can get some timing correct.
What do you think about this play?
This play is a favorite of mine. 2 weeks or so before expiration I pick up a couple calendar spreads in XOM, and they seem to work out fairly consistently. Hopefully this month will be no different. I saw XOM coming into some resistance from last month and also observed that it wasn't really participating in the up move with the rest of the market. So I picked up some Feb 80 puts at 3.80 a piece. I waited to get a couple of dimes, then I sold the front month against for a nice wide calendar spread. I make money as long as the stock stays within 75-85 in a week and a half, which I think is very feasible. I'll close out late next week.
Here's the risk profile for a single contract, as an example: