It’s always nice to bounce back with a solid trade after a disappointing loss…

Here’s some context…

Last week, I failed to fully capitalize on the inevitable downside following the blow-off top of the Bed Bath & Beyond Inc. (NASDAQ: BBBY) short squeeze.

Instead of being patient and sticking with the $20 weekly puts I had originally purchased, I let intraday price action scare me out of a winning setup…

Had I held those puts for another day or so, I would’ve made a massive profit. Instead, I sold for a $20,000 loss.

But I’m an experienced trader. I don’t let losses affect my game plan.

As disappointed as I was in the BBBY trade, I knew that I’d have the opportunity to redeem myself soon enough.

After all, trade opportunities are like buses … there’s always another one coming.

Sure enough, last Friday, August 19, I was convinced the major indexes were forming a near-term top, so I bought puts on Apple Inc. (NASDAQ: AAPL), Amazon.com, Inc. (NASDAQ: AMZN), and The Walt Disney Co. (NYSE: DIS).

Keep reading to see how my trade panned out…

The SPY’s First Red Week

As last week’s price action was heading into a close, I was paying close attention to the S&P 500 ETF Trust (NYSEARCA: SPY)…

SPY 6-month daily chart — courtesy of StocksToTrade.com

Why was I watching the SPY like a hawk?

Because the index was finally putting in its first red week…

Anyone who’s followed my trades for a while will know I relish the first red week/first red day for put-trading opportunities.

After all, the first red week/first red day is my favorite pattern I’ve ever learned from Tim Sykes. I’ve used it over and over again to help me reach nearly $4 million in trading profits.

These periods can bring about HUGE selling, which can mean even bigger profits for put traders.

Let’s take a short trip down memory lane…

Back in late June, I pointed out the first red week on Exxon Mobil Inc. (NYSE: XOM) and how it was presenting a potential slam-dunk short opportunity.

Can you guess what happened next? Just one week later, we saw the complete destruction of oil stocks. 

Bottom line: This wasn’t a coincidence. The first red week very often capitulates into further selling.

Knowing my history about the first red week led me to the play we’re gonna discuss today…

How I Nailed My Three-Legged Puts Trade

So, I knew I wanted to short the overall markets … but how?

If you know me, you know I almost exclusively trade options. And I knew this setup wouldn’t be any different in that regard.

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Instead of simply buying puts on the SPY, I decided to spread my trade out a bit and buy a combination of bearish contracts on names that are heavily weighted in the SPY (and other major indexes).

After looking at my options (excuse the pun), I decided to buy the following contracts:

Apple Inc. (NASDAQ: AAPL) 8/26/2022 $170 Puts for $1.30 (sold for $2.61, +99%)

Amazon.com, Inc. (NASDAQ: AMZN) 8/26/2022 $135 Puts for $0.89 (sold for $2.40, +168%)

The Walt Disney Co. (NYSE: DIS) 8/26/2022 $115 Puts for $0.34 (sold for $0.84, +146%)

All told, between the three positions I entered with a starting stake of just over $75,000 on Friday. 

By Monday, I had more than doubled my principal for an overall gain of 113% and a verified profit of $85,062!

After so many weeks of a bear market rally, I knew the dip was coming.

All I needed was the first red week for confirmation. And this time, unlike last week with BBBY, I was able to capitalize beautifully.

Final Thoughts

I don’t write this to brag or show off my gains. 

Rather, I’m detailing my trade thesis to show you my thought process behind a classic first red week trade.

These setups are my bread and butter. Back to the basics. It doesn’t get much more perfect for my strategy than this.

I want you to start to see the first red week for what it is … a golden opportunity for trading puts.