We've been talking a lot lately about the number of stocks setting up to play "catch-up" to this bull market that is only just now starting to get the attention it deserves, in spite of it being nearly 8 months old now, by our measures.
Today's trade is in another one of these setups that continue to work for us ($CAT and $IWM are great, recent examples).
I have a feeling there will be a large segment of the trader population that hates this trade. And that is precisely why I think it has a good chance of working.
It's Friday. It's late in the day. I won't waste your time with a long preamble. Let's get right to it.
It feels like whatever items have been holding the broader markets back are falling by the wayside one by one, clearing the path to the next leg higher in this bull market.
And with volatility (as measured by $VIX) making new yearly lows, it's getting more affordable to make a bullish play with simple long call option trades.
I'm continuing with my recent bent of positioning carefully in speculative names that have the potential to rip if the market resolves higher out of this Washington nonsense.
Today's trade is in a name that is showing signs of squeezing higher. It just needs a spark.
It's been a good run for many of our bullish long trades. As such, it wouldn't surprise me if stocks took a bit of a breather soon.
And considering so many stocks we've been tracking are starting to look pretty extended, I'm going to go fishing in the weak stocks pond to find some opportunities for portfolio diversification in the event that stocks go sideways or dip a little bit in the weeks ahead.
One nice thing is the stock market lift this week has really zapped options premiums across the board. So today's trade offers us a somewhat rare opportunity to get responsibly short with long puts.
I'm filing today's trade under the category of "Hard Trades." Not because it's particularly hard to execute or because it's a complicated multi-legged spread. It won't require an excessive amount of margin to get positioned nor is there any risk of unlimited losses.
It's hard because people might look at the trading action of the past few days and think that it's "gone too far" and "I should wait for a pullback."
And traders who think that way may be right.
But here's the thing: sometimes the best trades to get into are the best precisely because they are the "hardest" to pull the trigger on. And that's where our opportunity is. Those of us who fight through the conventional wisdom of average traders and get positioned ahead of the crowd will be lifted later on by those same traders who were "waiting for a pullback" and put an ever-rising bid underneath our stock that fuels our future gains.
Full Disclosure: I'm a Buffalo Bills fan. As such, I'm excited about this upcoming NFL season. This is the year! Does this fact color my interest in today's trade? Maybe.
I get all my speculative juice in the financial markets. But there is a growing number of Americans who are jumping into online sports betting. The increases in both participation and dollars wagered is skyrocketing.
Today's trade is a bet on a continuation of this trend that will likely be driven by the next NFL season.
Options premiums have risen a little bit in recent days due to the fed, earnings, government data, and trader indecision, and [insert your favorite scary story].
Whatever the reason, this feels like a good time and opportunity to add some delta-neutral positions to my portfolio.
As we're starting to get the latest round of earnings reports into the rear-view mirror, we're getting some clarity on the next crop of leaders for a potential move higher in the stock market.
Today's trade is on an emerging leader in the Defense sector that positions us very offensively for the next move up.
In an effort to provide some much-needed portfolio diversification, I'm adding a delta-neutral credit spread to the mix.
There aren't a whole lot of juicy premiums out there (thank you plummeting $VIX!), but there is an ETF in a sector that looks set up for some sideways digestion over the near term that should play nice with a short Strangle.
P.S. We do trades like this regularly. If you'd like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free! Or give us a call to learn more: 323-421-7991.