DailyPlay – Opening Trade (ALL) – December 6, 2023

ALL Bearish Opening Trade Signal

View ALL Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 6 Contracts Jan 19th $140/$145 Call Vertical Spreads @ $2.02 Credit per contract.

Total Risk: This trade has a max risk of $1,788 (6 Contracts x $298) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $298 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is bullish and overbought and, therefore expected to pull back.

1M/6M Trends: Bullish/Bullish

Relative Strength: 10/10

OptionsPlay Score: 104

Stop Loss: @ $4.04 Debit. (100% loss on premium received)

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Tuesday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

As equities continued to rally over the last few weeks, we saw The Allstate Corporation (ALL) following suit and is now trading at a major area of resistance of around $140. With a five-week bullish run, the S&P500 has also entered an overbought condition as it formed a double top at 4,600. With a pullback developing, we expect to see overbought equities to follow, of which ALL is one. 

We will look to Sell the Jan 19th $140/145 Call Vertical @ $2.02 Credit. With a hypothetical portfolio of $100,000, I recommend risking 2% of the portfolio’s value to this trade, which is 6 Contracts for a risk of $1,788. We will set a stop loss on the put spread at around 100% of the premium received @ $4.04 Debit.

ALL – Daily