Trade Alert - (W) December 13, 2022

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.

Tech Alert - Wayfair Inc. (W) – BUY

BUY the Wayfair Inc. (W) January 2023 $50-$55 in-the-money vertical BEAR PUT spread at $4.30

Opening Trade

12-13-2022

expiration date: January 20, 2023

Portfolio weighting: 10%

Number of Contracts = 23 contracts

This is a tactical trade in furniture e-seller Wayfair Inc. (W) that W will not rise above $50 in the next 38 days.

I am fading this big pop in W shares. We are massively overbought in the short term and I believe W will retrace to the mean from here.

We printed lower than the forecasted inflation rate of 7.1% and in the short term, much of the bullish news is priced into tech growth shares. I don’t see where the incremental buyer comes from in W shares.

Therefore, now active traders will immediately face the Fed policy meeting Wednesday. It is highly unlikely that Powell is going to suggest that the battle against inflation is won. The Fed is going to remind the market that it has much more work to do and that a soft CPI report does not do that much to shift what it will need to do in the months ahead.

I believe this is a good entry point to selling W and this is how I am playing it.

Here are the specific trades you need to execute this position:

Buy 23 January 2023 (W) $55 puts at………….………$15.50

Sell short 23 January 2023 (W) $50 puts at………….$11.20

Net Cost:……………………..…….………..….............….....$4.30

Potential Profit: $5 - $4.30 = $.70

(23 X 100 X $.70) = $1,610 or 16.28% in 38 days

The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.

Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.

Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.