Today's trade is something I don't do much of: a pairs trade, but with an options twist.
A typical pairs trade goes like this: You find two stocks that typically trade together, but for some reason, they've diverged. So, you buy the underperforming stock and short-sell an equal dollar amount of the outperforming stock. This is typically a market-neutral trade where you're betting the values of the two stocks will eventually resume their normal parity, resulting in a net profit from the two trades.
We have a situation developing right now that screams pairs trade to me, but I'm going to do it with options.
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