Trade Alert: Liberation Day

Trading a binary outcome.

Uncertainty Ahead Of Liberation Day

As Bloomberg columnist Conor Sen noted on X yesterday, we seem to be facing a big inflection point this week.

I don’t think the special elections are as big a deal as he does, but President Trump’s announcement of the details of our new tariff regime (Liberation Day) seems like a big deal. Either the details are worse than the market expects, in which case we see another leg down in stocks, or the reverse and we get a big relief rally.

When In Doubt, Bet On Both

Since we don’t know which is going to happen, why not bet on both outcomes? As long as our potential upside on each trade is greater than 100%, we can make money on the combination of both bets in either outcome. As it happens, our potential upside on each trade is much higher.

Our Bullish Name

This stock was one of our top ten names as of last night, and it had the strongest fundamental rating (6 out of 10, via Chartmill) and second-strongest technical rating (9 out of 10) on the list. The options market estimates a move of 5% in either direction by Friday, and if it ends up 5% higher, we can make close to 400% on our trade.

Our Bearish Name

This stock is weak technically (3 out of 10) but strong fundamentally (7 out of 10). More importantly, it’s politically and economically sensitive, and pretty volatile. The options market predicts a move of 8% in either direction by Friday’s close. If it closes 8% lower, we can make close to 300% on our trade.

What If The Stocks End The Week Flat From Here?

The worst case scenario for these two trades would be these two stocks ending the week flat from here. In that case, our maximum downside on each trade would be 100%.

Details below.

Our Bullish Trade

The stock is Spotify (SPOT 0.00%↑), and our trade is a vertical spread expiring on April 4th, buying the $570 strike puts and selling the $580 strike puts, for a net credit of $8. The max gain on 1 contract is $800, the max loss is $200, and the break even is with SPOT at $572. This trade filled at $8.

Bonus Bullish Trade

Since I’m a bit more bullish than bearish now, I also bought a couple of $590 strike SPOT calls expiring on April 4th for $1.67. The max gain on those is uncapped, and the max loss is $334. This trade filled at $1.67.

Our Bearish Trade

The stock is Tesla (TSLA 0.00%↑), and our trade is a vertical spread expiring on April 4th, buying the $260 strike call and selling the $250 strike call, for a net credit of $7.50. The max gain on one contract is $750, the max loss is $250, and the break even is with TSLA at $257.50. This trade filled at $7.50.

Exiting These Trades

• SPOT credit put spread: a GTC order to buy-to-close at a net debit of $0.20, raising that price if necessary as we approach expiration.

• SPOT calls: a GTC order to sell one call for $4, and trying to get out of both for whatever I can before Friday’s close.

• TSLA credit call spread: a GTC order to buy-to-close at a net debit of $0.20, raising that price if necessary as we approach expiration.