We’ve adjusted a position in the Paid-to-Play portfolio today: [Read more…]
[Options] Going For a Margin of Safety in Tech
There’s a time to be aggressive and go for big gains, and there’s a time to shoot for higher probabilities with smaller payout potentials.
I’m finding it hard to muster any conviction to go either long or short right now, as I can make compelling cases for both the bull and the bear thesis here.
In today’s tape, my feeling is we need to err on the side of being too conservative and trade with a margin of safety.
So today, we’re putting on what I feel to be a conservative, delta-neutral options trade in the technology sector ETF $XLK.
[Options Premium] Consumers Going Sideways
Depending on who you ask, people might agree that consumers are feeling the pinch of inflation. The sentiment that I encounter on a nearly daily basis is: “I can’t believe how much _____ costs now. It’s insane!”
If we look at a daily chart of the consumer discretionary stocks ETF $XLY, we might draw a conclusion that consumers are beginning to feel tapped out, as the upward momentum in early 2023 seems to have run out of steam.
With elevated options premiums in $XLY, this sets up a nice options premium collection play.
[Options Premium] Have Bonds Bottomed?
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…]
[Options] Uncle Warren Time
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.
[Options Premium] Stocks are Signalling Sideways for Longer
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…]
[Options Premium] Selling Premium in Qualcomm
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…]
[Options] NextGen Going Next Level
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.
- « Previous Page
- 1
- …
- 18
- 19
- 20
- 21
- 22
- …
- 135
- Next Page »