GME 21/24/28 Broken-Wing Put ButterflyRange-Bound Pullback Set-Up:
Since about early September GME has been range bound between 29 and 24. The entire market was down for the month of September, yet this traded range bound in this area. But towards the end of September, it tightened it's range bound between 27 and 24 and trending lower at a slow pace. With the big green day we had in the markets Thursday after CPI and another green day on Friday, this really didn't move as much. If the range is getting tighter and trending lower, we could be setting up to head lower in the 21-24 range. Which is why I had the idea of a Broken Wing Put Butterfly which can work great in these range bound set ups.
In order for me to put this trade on, I need to see this trade below were today's candle ends up. Because as of now, it's looking like a reversal candle at the area of resistance. So I'll have to check this tomorrow before executing my trade. As far as stops, I'll be position sizing with max loss. If the market decides to head higher the rest of this month and GME decides to follow the general market, this could make it's way back to another resistance point of 29ish. If by the end of this week it gets to 29, I'll want to see a reversal candle at 29, before I decide to get back in another trade.
Trade Set-Up:
No trend. It's making relatively equal highs/lows. The 20-day & 50-day SMA's are flattening out as well. I've established that resistances for this particular trade idea is 27 and support at 24. This small rally has brought the stock back up to resistance level and a reversal candle is currently forming.
T.E.S.T.
Timeframe: 3 weeks. I'll have a December 2nd expiration date.
Entry: If this trades below todays possible reversal candle, my entry will be right around 26.
Stop: I'll be positioned for max loss.
Target: My target is 24.
Profit Score:
Potential- 2
ATR- 2.18
Score- 0.92
Stock Outlook: 0 to -1
Trade Breakdown:
Chart Set-up is Range-Bound and consolidating.
Entry: I'm going to sell the December 2nd 24 strike and buy the December 28 and 21 strike. There are no earnings scheduled until December 14th so stable volume is anticipated.
Position Sizing: This should be a Net Debit of about 3.10ish by tomorrow if it does fall to 26 tomorrow. I'll be setting up for max loss and only risking 2% of my portfolio.
Trade Management: A week before this expires expires I will analyze the trade to determine if I should close out the position before expiring. If this falls below 24 before December 2nd and looks like it wants to run back up to 24, I might want to hold this to expiration to close out near the apex of the trade.
