From the Desk of Kimmy Sokoloff

It's Friday again, and it's options expiration again.

Trading can be harder on days like these, so it's a good idea to trade smaller.

There was an inbound question to me this week regarding adjustments I make on short strangle trades.

For reference: A Short Strangle is a delta-neutral options position that consists of selling equal amounts of out-of-the-money naked puts and calls for a net credit. If everything goes according to plan, the underlying stays in a trading range and I can realize a profit buying back the short options for cheaper than I sold them.

Of course, it doesn’t always work out that simply. Many times, we need to play defense. Defense often involves rolling short options further away from the current price action. In practice, this means buying to close the existing short option and selling a further out-of-the-money option (in the same expiration series) for a combined net debit, which reduces my total net credit in the campaign.

The reader was asking me how I choose my “take profit” limit order following a defensive adjustment. Here was my answer:

From the Desk of Kimmy Sokoloff

Even though the indices trended higher today, it felt like we weren't moving at all.

Tomorrow is Friday, and for the past few weeks they've been running the market higher.

We've adjusted a position in the Paid-to-Play portfolio today:

If this is a bull market, then what comes next?

Breadth Expansion.

More upside participation.

Sector Rotation.

The list of the 52-week highs getting longer.

We've been betting that this is a bull market since last year. That has worked in our favor.

But what does the market need to do to reiterate that we are still, in fact, in a strong, healthy bull market?

More new highs.

Here's a look at the NYSE new 52-week highs list creeping higher in recent weeks.

The largest insider buy on today's list comes in a Form 4 filing by the executive vice president and chief people officer of Stericycle $SRCL.

That purchase was worth $308,618.

From the Desk of Kimmy Sokoloff

Let see what today brings.

I still think it would be healthy for the indices to pull in further.

$SPY closing its gap down to 422.92 would be a decent contraction.

From the Desk of Steve Strazza @Sstrazza

Welcome to The 2 to 100 Club.

As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!

One way we're doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B). 

Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.

But the scan doesn't just end there.

We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.

From the Desk of Kimmy Sokoloff

It was a consolidation day for most of the indices, except $IWM.

I'd still like to see $SPY pull back to 423, but time will tell.

As the bull market in stocks continues, the lifeblood to keep the ball rolling is sector rotation.

We're already seeing some of the big caps that have driven the first leg of this run start exhibiting signs of overexertion (check out $GOOG today).

It makes sense to us that stocks further down the cap scale are going to start asserting themselves and perhaps in some cases play "catch up" to their big brothers.

Today's trade is in a cyclical name in the Logistics space.

We've adjusted a position in the Paid-to-Play portfolio today:

The largest insider buy on today's list comes in a Form 4 filing by Diversified Healthcare Trust $DHC director Adam Portnoy.

Portnoy reported a purchase of $9.8 million in the small-cap health care REIT.