Ok, today's title is a cheeky play on the ticker symbol I'm trading today. I couldn't help myself.
Today I'm getting into a low conviction trade, but shifting the probabilities in my favor so that even if I'm wrong, I still have a good chance of reaching my profit objective. Pretty sweet, right? This is one of the many reasons I like trading options.
It's that time again where we start heading into the next monthly expiration cycle and I review any options positions that remain open which might require some adjustments, monitoring, or closing before we get too close to expiration.
The October expiration cycle has been good to us. At the time of this writing, I've already closed two positions that hit my stop loss levels ($NKE, $DE), and two others that hit my profit objective ($GLD bull call spread, $PHM bull calendar spread). And as usual, the bulk of profits for this cycle came from just a couple trades.
These are the remaining open October positions that need some monitoring:
During the course of my day-to-day engagement with the markets and market participants, including subscribers to All Star Options, I'm often asked my thoughts about how I would manage some position that somebody is in. Usually goes something like this:
Sean, I've been in this inverted double reverse downward dog position and now I'm losing money. What should I do?
Ok, so I made up the name of the position, but you get my point. People do weird things and they are looking for help.
One commonality I get from people engaging with options is that they bought long-dated calls (sometimes Leaps) in stocks they are bullish on in lieu of buying stock. And they got lucky -- real lucky. So lucky in fact that they are sitting on enormous open profits on calls that are now WAY in the money.
In this Episode of Allstarcharts Weekly, Steve and I make the bear case for US Stocks. I think we've been pretty clear about the fact that we believe stocks resolve this consolidation since 2018 higher, not lower. But I always think it's important to take the other side and consider the alternative. What will the market environment most likely look like if we're wrong, and we should be selling stocks rather than buying them. I think we brought up some good points here.
Sometimes, the charts set up where one could make a case for a consolidation being on the cusp of breaking out. One such beleaguered company appears to be doing just that. If there's any follow through, there is blue skies ahead and I've got a play lining up on the runway to take advantage of the tailwind.
Technology is the largest sector of the market from an indexing perspective, but it's also pervasive because it finds its ways into other sectors/industries and often plays a big role.
With that as our backdrop, it's clear why Technology's relative performance is an important barometer for the health of the market...and it's been quite good since breaking out to new highs in 2016.
So can it continue, or are we due for some TECHnical difficulties in the weeks and months ahead?
We look at a lot of intermarket relationships and try to analyze the same things, but from different perspectives. It's all part of the weight of the evidence approach that we so often preach. Today we're focusing in on the relative strength (or weakness) in Consumer Staples as a heads up for the next move in the US Stock Market.
Consumer Staples are funny bunch. Think about it like this: regardless of how bad the economy might get, as a society we're still going to brush our teeth, wash our dishes, smoke cigarettes and drink beers. Those are Consumer Staples. They tend to be less volatile and underperform when stocks in general are going higher, but outperform when stocks are selling off, for the same reasons.
I love it when steady dividend payers breakout to all-time highs. What's better than a stock breaking into blue skies and paying you a dividend to hold on? In the recent All Star Charts monthly conference call, JC uncovered an opportunity in an insurance company stock that has us thinking about profits. Sure, we options traders don't get to collect any dividends, but it is nice knowing that yield-starved savers will keep a bid under stocks like these as long as interest rates remain comically low.
Weekends are great to just take a step back and see what is actually going on. It's really easy to get caught up in the day to day noise. I talk about the power of Monthly Chart Reviews. This is a similar process, just done more frequently and timeframes are shorter-term. But the taking a step back part follows the same philosophy.
Here are a few things that I'm thinking about this weekend:
