Today was a stellar day on the Street. The dingy old Dow didn’t just participate; it led the charge for a change! Banks were booming as well with financials finally seeing some much-needed sector rotation. Luckily we mentioned the space in the Options Report so it should have been on your radar. The second sector selected over the weekend was XOP, and she was flying high today as well.

Here’s my fist.

Bump it.

I noticed coach Gino’s breadth indicator saw its first close above 50 since June 13th, so participation is rising to confirm the power of the buying binge.

In celebration of today’s profit shower, let’s highlight a few recent trades. On a side note, I plan to resurrect my “Month that Was” series that I left by the wayside at the end of last year. Keep an eye out for the return installment in August. It includes a retrospective on my trading performance.

A recent Options Report included FedEx as an oversold bounce candidate. Let me share how I traded it. This will illustrate the benefits of bull put spreads, scaling-in, and proper management.

On June 25th, FDX was deeply oversold, and I thought due for a bounce. To play it I sold an Aug $220/$210 bull put spread for $1.35 (see #1 in chart). The initial plan was to take profits around 35 cents or add another batch if the spread value lifted toward $2.70.

After popping the next day nicely, the stock plunged another $10 toward $222. On June 28th, when FedEx started to form the bottoming tail, I deployed a second Aug $220/$210 bull put spread for $2.90 (see #2 in chart). The profit target was $1.90. Because FDX had fallen so far, I also decided to modify my initial target from 35 cents to 75 cents.

Here were the trade details as of the end of day June 28th:

FDX @ $226. Aug $220/$210 bull put near $2.80.

Short $220/$210 bull put @ $1.35 credit, target 75 cents.

Short $220/$210 bull put @ $2.90 credit, target $1.90.

Over the next few days, FDX chopped higher and on July 3rd (see #3 in chart), my profit target filled closing my second bull put at $1.90 locking in a $1.00 gain in the process.

Let’s pause an mention a few key takeaways before moving forward.

First, the oversold setup in FDX on June 28th was more attractive than the posture at my original entry on June 25th. Because I entered with a partial position, I was able to add size at the more advantageous entry. Traders who don’t scale-in can’t do this.

Second, because stock prices rapidly rocket back from oversold positions, bull puts entered near the low often hit their profit targets quickly. In this instance, the vertical spread moved from $2.90 to $1.90 in only three trading sessions – even though there were still some 45 days remaining to expiration.

With today’s pole vault in FedEx, the remaining bull put has fallen back to $1.05, a stone’s throw from my target. All we need now is a bit of upside follow through, and we should be able to close out this successful saga of put selling.

Was I early (read: wrong) on my FedEx read? Yes.

Did I lose money? No.

How? Proper management, of course! ‘Tis the secret sauce of all successful loss circumventions.

Financial freedom is a journey

The Tales of a Technician series is brought to you by Tackle Trading.

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.

# Sign up now for a 15-DAY FREE TRIAL #

Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involve a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax, and accounting advisers, to determine whether such trading or investment is appropriate for that user.