Trade Alert: Buying The Dip
Bullish options bets on our current top name plus two other stocks.
The Risk Of Buying The Dip
If we’re heading into a bear market, buying the dip might not pan out. To try to skew the odds in our favor a bit, I’m looking for three different kinds of stocks:
Portfolio Armor top names, particularly ones exhibiting our strongest factor (a measure of options market sentiment). In last night’s top ten names, only our number one name exhibited this factor.
Under valued, oversold names. Today’s example of this category has a Chartmill overall valuation rating of 9 (out of 10), a Piotroski F-Score of 8 (out of 9), and a Relative Strength Index (RSI) of 26 (scores below 30 are generally considered oversold). My theory here is if their next earnings release is decent, the stock might catch a bounce.
Oversold names that aren’t undervalued according to standard metrics, but the stocks are special. Today’s special name is Tesla (TSLA 0.00%↑).
Our maximum possible gains on these trades range from about 200% to 400%, and our maximum possible loss is 100% on all of them.
Details below.
Trade #1: Our Top Name
The stock is Futu Holdings (FUTU 0.00%↑), and our trade is a vertical spread expiring on March 14th, buying the $117 strike calls and selling the $119 strike calls, for a net debit of $0.50. The max gain on 8 contracts is $1,200, the max loss is $400, and the break even is with FUTU at $117.50. This trade filled at $0.50.
Trade #2: Undervalued And Oversold
The stock is American Eagle Outfitters (AEO 0.00%↑), and our trade is a vertical spread expiring on March 14th, buying the $13 strike calls and selling the $14 strike calls, for a net debit of $0.32. The max gain on 10 contracts is $680, the max loss is $320, and the break even is with AEO at $13.32. This trade hasn’t filled yet. This trade filled at $0.32 on 3/3/2025.
Trade #3 Oversold And Tesla
The stock again is Tesla (TSLA 0.00%↑), and our trade is a vertical spread expiring on January 16th, 2026, buying the $380 strike calls and selling the $390 strike calls, for a net debit of $2. The max gain on 2 contracts is $1,600, the max loss is $400, and the break even is with TSLA at $382. This trade filled at $2.
Exiting These Trades
Assuming all of these trades fill, I’m going to set GTC orders to exit at net credits of about 95% of the spread (so, for example, $0.95 for AEO and $9.50 for TSLA), and lower those prices, as necessary, as we approach expiration.
Out of the TSLA call spread today at a net credit of $8, for a 300% profit.
Exited my FUTU spread at a net credit of $0.55 today, for a profit of 10%. Probably could have gotten out of this one for a gain of 100% to 150% earlier today if I had adjusted my exit order down last night.