XLP 73/70 Mar 18 Put Credit Spread

17 февр. 2022 г.

This idea is a little out of the norm for me. I generally stick to broad market, but from time to time I play sectors.

Credit Received: 0.36 or $36 / contract
Strikes: Short 73 Long 70
Max Loss: 300-36 = $264 per contract
Short Leg Delta: 30 Delta (more on this below)

Trade Reasoning:
1. Market is being beat up by both the Ukraine - Russia situation and inflation, if both continue to worsen I believe consumer staples (what XLP tracks) will outperform the rest of the market.
2. White line presents a possible support level above my short strike here - Check!
3. Renko Overlay indicator from tradingview.com/u/LonesomeTheBlue/ is a new addition to my chart, and it showed another decent support level (see picture below), this is represented by the yellow dashed line.



12% Return on risk - Less than 30 DTE - TP at 50% - SL at -200%

Notes:
1. Delta is almost 2x what I normally shoot for (16 delta normal short target), however with these sector ETFs there is often wide spreads, little volume and somewhat crappy IV as well. As such, beggars can't be choosers.
2. Average True Range - ATR on this thing is piddly, so I felt more comfortable going closer to the money here.
3. Renko has been something that I have played with in the past, but I found it left out TOO much info. As such this overlay option from /u/LonesomeTheBlue is a very welcome addition.