Wackinhut
Short

XLP 55 strike PUT, Betting on bearish XLP sector.

AMEX:XLP   SELECT SECTOR SPDR TRUST AMEX CONSUMER STAPLES INDEX
Hi, my name is Spencer and it's been a long time since I've posted any ideas. I use to be a forex trader for many years and due to time constraints with my great full time job and becoming a dad, I've switched to trading stocks and specifically options.

For this trade, I am entering a short position on XLP by buying the 55$ strike for about 5 dollars per contract. Looking at the S&P500 , I believe the overall market is about to struggle with higher interest rates and possibility of higher inflation . With this idea of higher interest rates, I've been watching which sectors have begin to perform the worst such as utilities, REITS, and especially consumer staples . Recently, Phillip morris had a huge sell off which equal to approximately 8% of the index. In addition to tobacco stocks struggling, the overall sector as whole has underperformed and has broken a "lower low" which signals a correction in the index. Currently we are tested the last support area before the index could really fall off the chart. My risk is of course the amount "I pay" for the option which 5$-5.10$ and am expecting atleast 1% move of the stock in order to break even. However, I could see another 10% correction and a possibility of a bearish trend beginning. With this in mind, the risk to reward ratio is about 1:1 and I hope to be making atleast 50% return and ultimately 100% in the longterm. If you are long the stock market, this is a cheap way to hedge the market buy selling one of the weaker sectors as bond yields increase.

Thanks for reading, and leave a comment. Sorry for the sound issue, its a little fuzzy but overall okay.
Hey thank you, I was just noticing that 1.96% drop yesterday and charting out my supports from 2015/2016 and noticed your idea here. I appreciate what you put together and just wanted you to know. I'm not experienced enough to know how to Buy Puts and Calls, but I could look for a sector short ETF or get to learning. Or, I will have to wait for the bottom. Patience! Thanks again.
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Wackinhut mikeram1971
@mikeram1971, Hey thanks for commenting. I am mostly bearish on XLP because of the trendline breaks as I mentioned in video. Also, the stock market as a whole looked to be going lower. Now that the market is near the lows, I would be taking some profits on XLP and rotating into buying one of the stronger sectors currently right now which is XLU. Surprisingly XLU has been making higher highs on the daily and I have shared a way to make 25%-33% in buying call option. Take a look if want.
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