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Trade Details: Bought to open 1 Nov 4th Alphabet Inc (NASDAQ:GOOGL) 815 put for $6.40, $645.49 total cost (33.4% of account), 5 days to go. The trade executed at 12:40:04 when the stock was approximately $815.20.
Potential: Based on trendline support around $807.50 and the 0.55 delta, the working near-term target on this contract is around $10. Will put on a trailing stop if the MACD histogram contracts on the hourly chart (see below).
Thesis: Alphabet is technically bearish on multiple chart time frames. Perhaps the most bearish view is the daily showing bearish MACD divergence (lower high in October vs August as the stock made new highs) and progression toward the zero line with a MACD/Signal crossover on Friday.
Zooming in, the hourly chart is showing a similar MACD dynamic with a smooth, ranging (i.e. tradeable) histogram and bearish stochastics and momentum. With support breaking down, puts look good here. I chose to trade the hourly chart and weekly puts to avoid election volatility next week.
This trade is supported by bearish macro context:
- Volatility is up, trading at 17.24, +6.49% at the time of this post
- The market's reaction to Comey's letter last Friday
- Negative price action in the broader markets over the last several days