Expert technical analysis of financial markets by JC Parets
Yesterday’s trading action in $TLT, the 20-year treasury bond ETF, gives me confidence that it might have been a near-term low.
I’m making the bet that it’ll hold for at least a few weeks. And the elevated options premiums here give us ample ammunition to wait it out. [Read more…]
We joke that when stock markets get stormy, it’s time to head over to Uncle Warren Buffett’s house to ride out the storm.
Of course, no science or extensively backtested algorithm is at play here that gives us this conviction. But time and time again, we’ve been rewarded for selling naked puts in $BRK/B when stocks slide and $VIX spikes.
If it ain’t broke…
Here’s a recent chart of $BRK/B that shows a level of support around $350 per share:
We’re going to lean against this level for our risk management purposes.
Here’s the Play:
I like selling $BRK/B November3 (weekly) 350 puts for approximately $5.00 per contract. I’m choosing this weekly expiration instead of the regular November monthly options because Berkshire is expected to announce earnings on November 3rd and I’d like to be out of my position (win or lose) before that deadline.
Our risk management is simple: If we see a $BRK/B closing price below $350 per share, putting our short puts in-the-money (ITM), that is my signal to close the trade, book the likely loss, and move on. I won’t be interested in sticking around to see if this is a false breakdown while holding a position that has the potential for unlimited losses.
Meanwhile, I’ll leave a resting good-til-canceled (GTC) limit order to buy these puts back for $2.50 per contract — half of what I collect in premium today. I want to take the “easy” profit and move on to the next trade.
In the unlikely event that we’re still in this position on the eve of expiration day which is also the day Berkshire announces earnings, I’ll close the trade down win or lose. I don’t want to be holding these short puts with their super high gamma into the binary risk event that is earnings announcements.
If you have any questions on this trade, please send them here.
If you missed last week’s video Jam Session, you can catch a replay on Stock Market TV.
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.
After slowly dipping my toes last week into the idea that it might be time to start getting into some new long exposure, the market’s reaction to the latest Federal Reserve action tells me the direction is still sideways until further notice.
So we’re literally betting on that today with a delta-neutral credit spread in the Russell 2000. [Read more…]
The post-fed interest rates decision hangover this week has thrown stocks back into the sideways slop zone. Therefore, until conditions change, we’re going to keep selling premium to ride this out.
Today’s trade is a defined risk premium collection play that gets us out just before earnings. [Read more…]
Future market leaders for the next bull run in the stock market are revealing themselves now. And today’s trade is in one of the hottest sectors of the moment – Energy.
Understandably, one look at this chart of NextGen $NXE might scare away the more timid equities traders among us who might fear a pullback after chasing an incredible run since the beginning of the year:
But their fear is our opportunity. Sometimes we have to do the hard things to earn big profits. Fortunately, we options traders can position ourselves with clearly defined risk while enjoying the potential for leveraged and unlimited upside if we get it right.
Here’s the Play:
I like buying $NXE February 7-strike calls for approximately 60 cents debit. This debit I pay today represents the most I can lose if there is no follow-through for this stock.
That said, if we don’t see any action higher and our calls are out-of-the-money on November 1st, then I’ll look to exit the position and wait for a better setup. Additionally, if I lose 50% of our premium (at any time) during my hold, then I’ll also look to exit to salvage what’s left of the premium.
In the meantime, if neither exit criteria are met, then I’ll continue holding these calls all the way into the month of February, shooting for the moon.
If you have any questions on this trade, please send them here.
If you missed last week’s video Jam Session, you can catch a replay on Stock Market TV.
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.
While the stock market continues to digest its recent run and weave through this sideways consolidation, we’re starting to get some pretty clear hints on which stocks will likely be leaders if/when the bull market resumes.
Today’s trade is an early bullish bet on one of those names. [Read more…]
Ok, that’s a stupid question but I’m out of pithy headlines.
When the market more or less is only offering you one style of options trade that makes sense in this environment, things might get a bit monotonous around here. And when that happens, my brain offers up ‘dad joke’-level headlines 🙂
But there’s nothing boring about making money and our delta-neutral credit spread trades continue to work. So we’re continuing with them with today’s trade. [Read more…]
The hunt for premium selling opportunities continues. And today’s trade is in a name that is heavily weighted in the Home Construction sector ETF, where options premiums — sector-wide — are a bit more elevated than the rest.
Thankfully, October options expiration happens the week before this company releases its next quarterly earnings report, so we don’t have any of that event risk to worry about.
