Open and closing trade alerts
SPLK, QQQ, HON, GLD
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With market volatility still very high, I’m continuing the small-ball strategy that I described in the March 2022 monthly issue. Shifting strategies has already paid off this week, and I’m optimistic that we’ll have another winner by Friday.
QQQ for the Quick Win!
After just 4 days, our Invesco QQQ Trust ($QQQ) trade closed for a 27% profit (2,416% annualized). We bet against technology stocks, and our plan worked to perfection when the the NASDAQ tanked on Tuesday.
In another bet against tech stocks, I opened a bear call credit spread on the software company Splunk ($SPLK). If you need a refresher on this type of trade, see this issue.
$SPLK has been rising since it reported strong earnings on March 2, but it also faces hefty price resistance at $133. This is in addition to the headwinds that tech stocks in general are facing in the near term.
In keeping with my high-probability trading strategy for our current market conditions, this credit spread has a 76% chance of finishing out of the money (OTM).
Also, when I opened the trade, the expiry date was only 7 days away. I chose this short timeframe because of how volatile the current market is. By choosing a conservative strike price and a condensed time frame, we limit the chances of our trade going from winner to loser at the last minute.
$SPLK trade details (dollar amounts are for 1 contract):
Bear call credit spread option with a March 11 expiration date.
Stock price at the time of my trade: $127.91.
Sold the $133 call and bought the $135 call.
Premium collected and max profit: $50.
Max loss: $150.
POP: 73% (for more information on this calculation and the following one, see the September 2021 issue).
Profit target: 50%-75% of max profit in 7 days or fewer.
Closed HON and GLD for a loss
Unfortunately, two of our trades were partial losers. Honeywell ($HON) got dragged down with the rest of the market after Russia’s invasion of Ukraine. While the stock is climbing back, there’s not enough time remaining before expiry for this trade to become profitable. So, I closed it to salvage some cash. This resulted in a loss of $201.54.
I also misjudged how long gold would stay overbought. The combination of inflation and fear has driven investors to safe havens and chaos hedges like precious metals and Bitcoin.
When I opened this SPDR Gold Shares ($GLD) trade, it appeared that gold’s rising price momentum had run out of steam. As the war between Ukraine and Russia worsened, however, gold soared again. I closed the trade today to salvage some cash and eliminate the risk of assignment. This resulted in a loss of $94.
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Disclaimer: I’m not a stock broker or financial adviser. I cannot and do not provide personal investment advice, and The Antagonist should never be interpreted in such a way. This newsletter is intended for informational and educational purposes only. My recommendations represent the actions that I plan to take or have made based on my analysis and what works for me. Any investments that you make are your responsibility. Therefore, it is imperative that you perform your own due diligence before replicating any of my trades.