Today, we are using some moving average filters to find bearish stocks and then looking at a couple of different trade ideas.
First the stock scanner:
Which produces these results:
Two companies that meet our criteria and they are Shopify (SHOP) and Marvell Technology (MRVL).
SHOP Bear Put Spread
Using the September 20 expiry, traders could buy the $60 put and sell the $55 put.
The price for the trade is $1.60 which means the trader would pay $160 to enter the trade. This is also the maximum loss. The maximum gain be calculated by taking the width between the strikes and subtracting the premium paid:
5 – 1.60 x 100 = $340.
The breakeven price for the trade is equal to the long put strike, less the premium. In this case, that gives us a breakeven price of $58.40.
Company Details:
Shopify Inc. provides a multi-tenant, cloud-based, multi-channel commerce platform for small and medium-sized businesses.
Merchants use the company's software to run business across various sales channels, including web and mobile storefronts, physical retail locations, social media storefronts, and marketplaces.
Shopify's platform enables merchants to manage products and inventory, process orders and payments, ship orders, build customer relationships and leverage analytics along with reporting from one integrated back office.
Moreover, Shopify hosts a huge database of merchant and customer interactions.
Merchants leverage this transactional dataset to get meaningful insight into the sales channel growth prospects and consumer behavioral aspects.
This improves their ability to target prospective customers more easily, which drives sales growth.
The Barchart Technical Opinion rating is a 56% Sell with a Weakening short term outlook on maintaining the current direction.
Let’s look at another bear put spread, this time on Marvell Technology.
MRVL Bear Put Spread
On MRVL stock, traders could buy the September $60 put and sell the $55 put to create a bear put spread. That spread could be bought for around $1.75.
The cost of the trade is $175 which is also the maximum loss with the maximum possible gain being $325. The maximum gain would occur if MRVL stock fell below $60 on the expiration date.
Company Details:
Marvell Technology is a fabless designer, developer and marketer of analog, mixed-signal and digital signal processing integrated circuits.
The company operates in Bermuda, China, Germany, Japan, Korea, Taiwan, the United Kingdom, and the United States.
Marvell specializes in highly integrated System-on-a-Chip (SoC) and System-in-a-Package (SiP) devices based primarily on ARM designs and sells to both enterprise and consumer customers.
It has a significant number of patents in design, software and reference platforms to its credit.
The company's product line includes application processors, controllers, switches, communications and networking processors and technologies, as well as other SoCs for printers and smart home products.
These serve two broad end markets - data center and enterprise networking.
The Barchart Technical Opinion rating is a 24% Buy with a Weakening short term outlook on maintaining the current direction.
Conclusion
There you have two different bearish trade ideas on two different stocks. Remember to always manage risk and have stop losses in place.
Please remember that options are risky, and investors can lose 100% of their investment. This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.
On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
