NEW DIRECTIONAL CALL PLAYS
SPDR S&P 500 ETF - SPY - close: 188.83 change: -4.83
Stop Loss: 179.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 128 million
Entry on January -- at $---.--
Listed on January 13, 2016
Time Frame: 4 to 6 weeks
New Positions: Yes, see below
The stock market's sell-off seems to be getting worse. Constant worries about a slowing global economy and the potential for another currency devaluation in China have spooked investors. The nearly non-stop plunge in crude oil hasn't helped although at the moment it looks like the $30.00 a barrel level is offering some short-term support for oil. I wouldn't count on oil holding above $30 though.
In the U.S. we have the Federal Reserve that has begun a rate-hiking cycle seemingly at the wrong time as the U.S. economy slows down. The Atlanta Fed's Q4 GDP growth estimates have fallen to +0.8%. Meanwhile corporate earnings are forecasted to be negative for the second quarter in a row, which would be an "earnings recession" in the U.S.
All of these ingredients have come together in a bearish recipe to send stocks lower. Eventually stocks will bounce. The tone on Wall Street today felt "a little panicky" according to some market watchers. We could be getting close to a bottom (at least a short-term bottom). Tonight we are going to try and pick a trade to catch the bottom. This is typically called "catching a falling knife" and can be hazardous to your trading account. Consider this an aggressive, higher-risk trade. I suggest small positions to limit risk.
The SPY has potential support in the $187.00 area and again in the $182 region. I'm looking at a buy-the-dip trade near the lower level. The October 2014 low in the SPY was $181.92. The August intraday low was $182.40. Tonight I am listing a buy-the-dip trigger to buy calls on the SPY at $183.00. We'll start with a stop loss at $179.65.
Buy-the-dip Trigger @ $183.00 *small positions to limit risk*
- Suggested Positions -
Buy the MAR $190 CALL (SPY160318C190) current ask $5.91
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike