Playing for a Face Ripper

Sean McLaughlin
October 25, 2019

Oh boy. I love when my boy JC gets fired up on an idea.

In a recent piece on copper and emerging markets, here's JC:

Have you noticed that with Tech and Software and other areas grinding sideways or lower, we’ve seen a consistent bid in Emerging Markets? ...I really think the squeeze is on.

He was a little bit more, um, verbose in an email header sending this piece to his subscribers that read:

Emerging Market Shorts Will Get Their Faces Ripped Off

LOL.

Well, I'm game. Let's do this.

We're going to play the Emerging Markets ETF $EEM.

It has great liquidity and the options premiums are currently pricing in the lowest volatility of the year.  When volatility is incredibly low, it sets up an ideal situation for cheap long calls.

Here's the Play:

I'm buying $EEM March 45 calls for approximately 65-75 cents. This is a straightforward bet that JC is nailing this "faceripper" call.

As always with long calls, I'll look to sell half of my position if the options double in value. Then I'll ride the rest all the way into March and evaluate what to do as we approach expiration. Generally speaking, if at that time $EEM is trading below our 45 strike, then I'll close the calls for whatever I can salvage (if anything) as theta becomes my number one enemy. If we're above 45 in March, then I'll hold the long calls for as long as near-term support holds, looking to squeeze out as much as I can in the trade.

All Star Options subscribers can email me questions on this trade any time here.

We do this kind of stuff multiple times per week. Try out All Star Options risk free!

~ @chicagosean

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