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Trade: We recommend selling 5 (half lot) Apr $77/79 bear call spread (50 DTE) for current mid-price of $.40/share or better. Can add the back half for $.60/share (on possible bounce; otherwise, can add 5-lot tomorrow under today’s low).
Technical Setup: Bearish gap under topping pattern daily with Major Resistance weekly chart.
Option Strategy: Bear Call Credit Spread. Defined risk strategy where you make maximum profit (net credit received) if the stock closes below the short call strike at expiration. We sell call strike price above resistance where the pattern suggests that the stock will not close above at expiry, and simultaneously purchase higher strike call than the one sold as a hedge and to reduce margin. The return on investment (ROI) is the credit received divided by the maximum loss (i.e., width of strike prices less premium received). The breakeven is the lower strike price less credit received (i.e., also your cost basis if assigned the stock). Considered a mildly bearish strategy since we are not buying puts (or shorting stock) and just calling a short-term top in the pattern. Trade has positive theta (meaning you make money on time decay) making it a high probability trade since we time with the technical pattern.
Stop Loss: $77.42.