Options Trading Newsletter - Happiness - Issue #165 [Options Today - Bear Call Spread on SMH]
Happiness...
Happiness
We all aspire to a life filled with happiness. After all, who would choose a life of misery? It’s said that happiness acts like a magnet, attracting positive energy—or ‘Chi’—and creating an aura that not only envelops us but also touches those around us, sharing and multiplying the joy.
Life, however, is a tapestry of experiences. We ride the highs and lows, never quite knowing when happiness will grace our lives. It may arrive early, stay for a while, or slip through our fingers if we take it for granted. Some of us face trials before we find happiness, but these struggles make the eventual joy all the more precious.
If you find yourself discontent with your current path, it’s unlikely that persisting on the same route will bring about change. Continuing to wallow in dissatisfaction only invites negativity, casting a shadow over your life. I urge you to break free from this cycle. Seek alternatives, pursue passions, and if necessary, make bold changes—be it leaving a job, altering your surroundings, or relocating. It’s a daunting challenge, but it’s essential for transformation.
The formula for happiness might seem elusive, but it’s simpler than we think:
In work, find a passion so deep that your career becomes a calling, and you’ll never ‘work’ another day.
In relationships, seek a partner who loves you deeply, and happiness will be a lifelong companion.
In spirituality, find inner peace, and contentment will follow, asking for no more than what you already possess.
"Happiness is not something ready-made. It comes from your own actions - Dalai Lama XIV”
SPX (5222)
Okay, its up 1.85% for the week as expected. It is 3 weeks of gains after a 3 week fall almost recovering back to all time highs of 5264. It’s like a magnet but could also touch and retrace and form a double top, we will never know. This week’s economic data may sway the bullish or bearish sentiment as Tuesday is the PPI announcement and Wednesday is the CPI. As both data are key to policy decisions by the Fed, it should move the market for sure.
In addition, many of the FOMC member appears this week with the Fed Chairman J.Powell speaking after PPI release on Tuesday. So do expect some form of volatility.
Earnings continues this week with BABA, HD on Tuesday, CSCO on Wednesday, WMT, BIDU, JD on Thursday.
Trading range for the week is 5150 to 5300.
NDX (18161)
NDX up 1.51%, 270 points for the week. It looks like there are many sellers at key levels as we saw quick selloff above 18200 level. We could expect the same above 18337 level.
All the MAG 7 advanced last week except TSLA. TSLA has been the odd one out moving against the direction of the market for the last 2 weeks. The news of the autonomous driving in China is sizzling out faster than its counterpart BIDU. We expect it to hit back to 160 before any support. TSLA have lost the no 1 spot to BYD and from the way things are moving, it’s not good for TSLA for the China market. .
Last week Geely’s EV unit ZEEKR (ticket ZK) listed on NYSE and was up 34% on opening. ZEEKR is another strong EV player with great models in its lineup and international markets. Keep an eye on this as it could be a mover in the EV stock segment.
Trading range for the week is between 18000 to 18400.
HANG SENG INDEX (18963)
HSI Broke out of the trend channel and is continuing its move up with a new support now at the upper trendline at 18300. From the lows, it has moved up around 28% now and expecting the next move up to 20,000 to 21,000 level. As market FOMO kicks in, we could see this to come in quick quickly as we saw in the post covid recovery in HSI in 2022.
OPTIONS TODAY - BEAR CALL SPREAD ON SMH
SMH the semiconductor ETF has risen 13% for the past month. We see resistance level above at 230 and further up 240. The top holding of SMH is NVDA which is also trading at its high but having some resistance above $900 levels and both the TTM histogram is sloping down indicating slowing momentum for the stock and price could move sideways or even to the downside.
Based on the price action and possible resistance level above on SMH, we could place a Bear Call Spread at above these resistance levels.
Trade Entry (21 June)
SMH is now trading at $223.65. One SD move for 21 June expiry is $14.88 which means SMH could go up to $238.55 or down to $208.77. Our trade is bearish, so we would want SMH price to go down. But at the same time, we will place our trade strikes well above 1 SD move ie. above $238.55.
Sell a Call at strike $240 and buy a call at $245 for $1.00 credit.
Max Profit is $100 and Max loss is $400. At $240 strike, we are 7% above the current stock price, which means SMH price can go up from current level, but as long as SMH stays below $240 at expiry, we will still WIN on the trade.
Trade Management
Exit at 50% of the max profit ie. when we make a profit of $50. Cut loss when the loss is at $200.
If the short strike gets tested or close to being tested, and we have 21 days more to expiry, possible to roll the trade in time for credit, if price action still shows a possible price decline or sideway going below the short strike of $240. If price action is bullish, it is better to cut loss at max loss of $200.
OPTIONS TODAY - UPDATE ON LONG JAPANESE YEN FUTURES
YEN futures could not hold at all and slide below our short put of 0.006 quickly. The USD remained strong and intervention effects remained short lived. We expect that the USD would continue to be strong up to elections in November and the higher rates for longer situation is supporting it very much. Even if this week’s economic data softens the USD to support an earlier rate cut, we expect it to be short lived. The pain point for BOJ has now moved up to 160 level.
If YEN futures goes back up this week, we could roll the trade in time with zero cost or small debit. If you want to redeploy the capital, then it may also be a solution to cut loss as we are left with only 4 weeks for a turnaround. The next set of major economic data for USD would come after expiry. Even BOJ’s policy rate will come after expiry.
OPTIONS TODAY - TRADE UPDATE IRON CONDOR ON MICRO CRUDE OIL FUTURES - JUNE24
The recovery of crude oil back to $80 level last week was short lived after it sold off end of Friday back to $78 level. As the price is close to testing the short put level of $77 the trade is more or less break even. The Call Spread of the Iron Condor leg has almost depleted the extrinsic value. We placed an order to leg out at $0.02 cents. It is now trading at $0.03. As we see some support at the $77 level any increase in price of crude oil will result in the increase in profit/reduction of loss of the Bull Put Spread. If the Bear Call Spread is closed, there is no opposing effect on the trade profitability if crude price goes up.
Checkout our Options Trading Newsletter Issue #160 for the trade analysis.
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