Trade Alert: Going Short

Taking advantage of an up day to enter some bearish trades.

Sep 09, 2024

A detailed illustration of a bear market scenario with a bearish trendline on a stock market chart. In the foreground, highlight a person or trader placing short trades during an up day. The trader is using a computer with trading screens showing red downward arrows and charts. The overall color scheme should be muted and dark to reflect the bearish market sentiment. Include elements like financial news headlines or a calendar indicating an up day within the bearish trend. No text or words in the image. Ensure the person has a clear and unobstructed head without any circles or artifacts.

Adding Short Exposure

When the market goes down, it’s nice to have some positions that are going up. With that in mind, I’m taking advantage of the up day to add some short exposure. This is the screen I ran on Chartmill as a starting point for looking for potential short names:

Share price above $3.
Has options traded on it.
Overall technical rating of 4 or lower (on a scale of 0-to-10).
Overall growth rating of 4 or lower (same scale).
Overall valuation rating of 2 or lower (same scale).
Piotroski F-Score of 2 or lower (on a scale of 0-to-9).
RSI > 30 (so not oversold).
No insider purchases in the last 3 months.

That screen generated 22 names. I went through that list and eliminated each name that beat earnings or revenue estimates in its most recent quarter, or otherwise had any materially positive recent news.

That left 6 names for us to bet against.

Details below.

Bearish Trade #1

The stock is MacroGenics (MGNX 0.00%↑), and the trade is buying the $4 strike puts on it expiring on April 17th, for $1.30. The max loss on 2 contracts is $260, and the break even is with MGNX at $2.70. ~~This trade hasn’t filled yet~~. This trade filled at $1.30 on 9/16/2024.

Bearish Trade #2

The stock is Sibanye Stillwater (SBSW 0.00%↑), and the trade is buying the $4 strike puts expiring on April 17th, for $1. The max loss on 3 contracts is $300, and the break even is with SBSW at $3. This trade filled at $1 on 9/9/2024.

Bearish Trade #3

The stock is Pliant Therapeutics (PLRX 0.00%↑), and the trade is buying the $12.50 strike puts expiring on April 17th for $1.90. The max loss on 2 contracts is $380, and the break even is with PLTR at $11.60. This trade hasn’t filled yet.

Bearish Trade #4

The stock is Barnes Group ( B 0.00%↑ ), and the trade is buying the $35 strike puts expiring on March 21st, for $4. The max loss on 1 contract is $400, and the break even is with B at $31. This trade filled at $3.64 on 9/9/2024.

Bearish Trade #5

The stock is CollPlant Biotechnologies (CLGN 0.00%↑), and the trade is buying the $5 strike puts for $0.60. The max loss on 5 contracts is $300, and the break even is with CLGN at $4.40. This trade hasn’t filled yet.

Exiting These Trades

I mentioned above the paywall that I had narrowed the screen down to six names. The sixth one was Cyngn (CYN 0.00%↑), but it has adjusted options I didn’t feel like dealing with. All of these puts are close to the money if not in the money, so we have a better chance of them being worth something near expiration than with our options trades that are further out of the money. Because of that, I am going to aim for lower profits on these trades. I’ll set GTC orders to exit at about double what we paid for them, and lower those prices, as necessary, as we approach expiration.