Expert technical analysis of financial markets by JC Parets
Premiums remain elevated in the options market as volatility persists and confusion among market participants reigns supreme.
We sold a delta neutral spread on Friday to take advantage of this environment. Today’s trade will also be a credit spread, however, this time we will be taking on some bearish directional exposure to counterbalance some of our long exposure.
We recently closed an October Short Strangle in the Energy ETF $XLE at our profit target. The timing was pretty fortuitous, considering the wild ride all stocks have been on since the latest Federal Reserve interest rates announcement.
With volatility ticking backup up quite noticeably, $XLE has climbed back up near the top of my implied volatility list of ETFs, and the November options are priced in such a way that we can sell some pretty far out-of-the-money strikes increasing our odds of success.
So let’s get right to it. [Read more…]
Eventually, even thick skulls like mine get the point.
Pretty much all summer long, the team here at All Star Charts has been mentioning Enphase Energy $ENPH as a strong outperformer that is on the verge of a potential epic breakout. During today’s internal Analyst meeting, the team agreed that now is finally the time to get involved.
JC and I did a video on a possible trade in $ENPH ahead of today’s Fed Reserve Interest Rates announcement. We did just get into it moments ago. Enjoy this video to get a great idea of why we like this trade and how we’ll play it:
A Bull Phase for Enphase Energy? @allstarcharts https://t.co/INbp6CH827
— Sean McLaughlin, NLD 📈 (@chicagosean) September 21, 2022
I know this might be breaking news to some of you, but there are often great opportunities to be had in international stocks. And the All Star Charts International Hall of Famers report regularly serves up the best setups out there.
Today’s trade comes directly from the most recent report, so let’s board the airplane and head abroad!
Every week, the team publishes the Follow The Flow report which surfaces unusual options activity. This is a report I reference often, not because I want to do the same trades that surface in the scan, but when I can find a technical setup that I like that is supported by the options flow, this can often lead to a bit of alpha with my own options strategy.
However, in today’s case, I think I may jump aboard with the unusual options buyers and play along with them in a small-cap oil tanker. [Read more…]
What a wild week, eh? On Tuesday, the rug got pulled on dip buyers with the latest inflation data point coming in hot, throwing a whole bunch of confusion into the market regarding the future of interest rates. Or, so I’m told.
The net result for us options traders is that there is once again some juicy options premium for us to sell into. And we’ve got a bunch of sloppy ETF charts that look primed for some net sideways actions over the near term. [Read more…]
We’ve been keeping a keen eye on Uranian stocks over the past few weeks. Throughout the recent broader market weakness, it became a common refrain in our internal analyst meetings: “…we’re still seeing relative strength in Uranium stocks.”
When we keep saying that over and over, maybe the market is trying to tell us something? *slaps head*
The stock that seems the strongest to us in the sector has been showing signs this week that it’s ready to break out. So let’s get to work. [Read more…]
Today’s blog title was uttered during this morning’s internal Analyst meeting by our Commodities Analyst Ian Culley.
He drew our attention to Wheat futures and the corresponding ETF in the stock market $WEAT and loves this setup for a long trade. We’re not fundamentalists here, but it’s hard not to be aware of the macro economic backdrop with inflation on the rise and food shortages looming in Europe with a cold winter on the horizon. This combined with the technical picture sets up a really nice high reward versus low-risk trading opportunity.
Here’s the chart for $WEAT:
This chart is a little stale, it doesn’t show today’s trading action which thrust $WEAT above that resistance line, trading almost up to $9.00 today before peeling back, giving us a better entry.
To take advantage of this setup, we’re going to keep it simple and define our risk with straight long calls.
Here’s the Play:
We like buying January 10-strike calls for approximately 55 cents. If $WEAT makes a run back up towards that consolidation zone in the $11-12 area, then these calls will pay off nicely — perhaps a 4-5x return on our invested capital.
The most we can lose in this trade is the 55 cents in premium we pay upfront. We’ll size our position assuming that if we’re wrong we’ll lose 100%. But we’ll keep an eye on the $7.80 level for risk management. If $WEAT closes below $7.80 then we’re likely wrong in this trade and will look to exit if there’s any premium left in the options to salvage.
On the positive side, if/when this trade starts working for us, I’ll look to sell half of my position if I’ve doubled my money. Doing this will remove all of my original risk capital from the trade, leaving me a #FreeRide on the remainder.
The potential for free unlimited upside? I’d eat that!!
If you have any questions on this trade, please send them here.
ASO subscribers who missed last week’s live video Jam Session where we review activity in our options portfolio from the past week can catch it here.
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.
