I've been noticing some mostly sideways action in the oil & gas space in recent months. And with premiums somewhat elevated in options, delta neutral income strategies become extremely appealing.
Selling premium when options volatility is relatively high is a repeatable edge that plays out in my favor over time. So I like to put myself in position to take advantage of these situations as often as I can -- ideally when the underlying is caught in a range and my analysis indicates the range is likely to continue.
For those new to the exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it's a custom index or inverted, who knows!
We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.
You can guess what it is if you must, but the real value comes from sharing what you would do right now.Buy,Sell, or Do Nothing?
I found a stock where earnings have come and gone with little impact upon the overall trend, volatility collapsed (predictably), and now the only question left to ask is: when does the Santa Rally begin?
Saturday I spoke at the Trade Ideas Summit in San Diego, outlining our bullish case for US Equities. It was a lot of fun and you can register here to receive the presentation replay when it becomes available.
In honor of the new all-time closing highs in the Russell 3000, S&P 500, and Nasdaq 100, I want to outline several stocks we want to be buying to take advantage of our bullish Equities thesis.
For those who didn't check the market today, here's the Russell 3000 making a new all-time closing high, just shy of its former intra-day high of 178. New highs are not a characteristic of a downtrend, so as long as prices are pressing above 178 our upside target is 196 in the coming months.
We've done the homework. New All-time highs are NOT a characteristic of a downtrend. Go back and check for yourself. I was just listening to the great Brooklyn poet Shawn Carter who inspired the headline. It's true. This is not a bear market, by definition. So should we be looking for stocks to sell or should we be looking for stocks to buy?
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
Have you noticed that with Tech and Software and other areas grinding sideways or lower, we've seen a consistent bid in Emerging Markets? Have you looked at Brazil lately? The last thing stock market bears want to see is rotation into these serial underperformers.
I don't think this is a tiny story either. I think there is a much bigger theme going on here that would be irresponsible to ignore. First of all, let's make something clear. Copper prices and Emerging Market stocks move together. You can't argue with me on this one.
Copper doesn't move with the "economy". Copper doesn't move with the S&P500. Copper is not a "Dr." of any kind. Copper moves with Emerging Markets. Period:
If we want to know what the largest institutions in the world are doing, we have to look at the biggest stocks. If you have 100 Billion Dollars to put to work, you're not buying crypto currencies or pot stocks in Canada. The big boy sandbox is where we want to look.
My friend Todd Sohn says that your best players are supposed to score a lot of your points. The S&P500 is a cap-weighted index, which means that it owns more of the stocks performing well and less of the ones doing poorly.
One of our bigger directional wins this summer/fall is showing signs of taking a breather, but traders with a memory are still keeping a bid under options prices. This is setting up the potential for a nice "income trade." When volatility is high (and therefore options premiums are juicy), and my bet is some sideways action in the near-term, these are the ideal situations to employ delta-neutral credit spreads.
This is my favorite time of the month - preparing for our Live Monthly Conference Call. It really gives me an opportunity to gather all of the evidence, put my thoughts and ideas down on paper and then explain it all in under an hour. It's all pretty awesome!
In this call we talk about the US Stock market and where it fits within the Global Market complex. Throughout this process we're also analyzing the commodities, interest rates and currency markets that apply to each country. Only then do we break things down to individual sectors and their sub industry groups to finally find the best stocks to express a bigger thesis.
We call this the top/down approach and I'm pumped to go through it all on Tuesday's Call.
