The Low Cost Bearish Call Hedge Strategy For The Week Of – 08-19-19

Quick Take: Low Cost Bearish Call Hedge Strategy

Time Frame: One to Twelve Weeks.

Stock: Bearish Market Edge Opinion – Short Stock Position.

Desired Stock Price Direction: Sideways to Down.

Option Position: Short ATM Call – Long ATM +1 Call (Bearish Call Credit Spread) and Long ATM Deferred Call.

Desired Result: Stock stays flat or moves down in price.

Maximum Risk: The stock rises in value. The loss is offset by the amount of the credit spread and the appreciation in the deferred anchor call.

Summary: If the stock stays flat or moves down, the credit spread will expire worthless and you will keep the credit. However, the deferred call will increase in value in line with the short stock position price decline. If the short stock position moves up, the loss will be offset by the amount of the credit spread and the appreciation in the deferred anchor call.

The following are this week’s Low Cost Call Hedge Selections. Each week, if conditions warrant one or more new stock positions are added to the Open Positions list. These stocks have a Bearish technical Opinion from Market Edge. The stocks and option spreads are added to the portfolio based on Monday’s opening prices. The stocks are removed from the portfolio after twelve weeks or if the Market Edge Opinion is upgraded from Bearish. To  access The Low Cost Call Hedge informative booklet click on the Get The Booklet tab located on the home page or at the bottom of this page.

This Week’s Low Cost Bearish Call Selections

There is one new selection this week: DE

On 08/15/2019, The current technical condition of DE is deteriorating indicating demand for the stock is weakening. If momentum continues to slow, further slippage in the stock is likely to develop. Over the last 50 trading days, when compared to the S&P 500, the stock has performed in line with the market. The MACD-LT, an intermediate-term trend indicator, is bearish at this time. DE’s chart formation is showing signs of reversing its recent trend. If the stock closes below $160.72 a change in trend will be confirmed. The stock is in a short-term oversold condition based on a Slow % K stochastic reading of 20 or lower. Over the last 50 trading sessions, there has been more volume on down days than on up days indicating that DE is under distribution, which is a bearish condition. The stock is trading below a falling 50-day moving average which confirms the deteriorating technical condition of DE. The stock is trading below its rising 200-day moving average which is bearish.

Current  Open Positions