In light of global events, we're seeing significant market reactions all over the place. And it seems like the narrative changes on a daily basis. Now more then ever, as a Trader, is it important to turn off the news and follow price. Price doesn't lie.
One trend that has been signficant and showing no signs of stopping is the bullish breakouts we're seeing in energy, commodities, and materials.
And today's name is one of the bellwethers in the space that is beginning to breakout from a multi-year base.
The hunt for options premiums to sell continues. And with VIX showing signs that it might want to give up the 30 level for a little bit, we may have the trend of implied volatility mean-reversion beginning to become a wind in our sails.
A quick perusal of the most liquid ETFs options markets that I follow revealed a surprising sector at the top of the list: Utilities. And the recent price action suggests to me we may have seen the $XLU ETF get a bit ahead of itself, and it could be due for a little consolidation.
I'm sounding like a broken record about elevated options premiums and my desire to be a net seller of options, and for good reason: $VIX continues to hang tight in the 30's. And when volatility is this high, it tends to favor the premium sellers. Not every time, but most of the time.
So during our morning Analyst meeting, me and the team were kicking ideas around for putting an options trade on today. And while there are some tempting candidates for putting delta-neutral credit spreads on -- we all coalesced around the idea of leveraging the high prices of put options here into a long position in Nucor Corp $NUE:
I feel like this has been the lead for many blog posts recently, but the trend continues: options volatilities continue to remain elevated across the board with $VIX holding above 30, and this makes me want to continue favoring strategies that are net short options premium.
But with the trade today, we're going to leverage options premiums to help us finance a bullish bet on NASDAQ stocks.
It started out with JC and I wanting to simply sell premium, but when we looked into $QQQ options it became pretty clear that we could get paid handsomely if recent lows end up becoming a pivot to higher prices and we took some put premiums to buy out-of-the-money calls.
With VIX closing the day today north of 30, I'm still on the hunt for premium selling opportunities.
So as always, I perused my list of the most liquid options ETFs and found an opportunity where premiums are elevated and the chart suggests some rangebound trading action is likely over the next few weeks.
The day got away from me so I didn't get a chance to put it on yet, but I've identified a delta neutral candidate that I'll be looking to enter in the early going tomorrow AM.
Wild market conditions persist! Yesterday, stocks had a huge gap down opening, but then spent all day ripping higher and closed convincingly in the green. Today, the rally picked up right where it left off.
Talk about whiplash!
This makes it incredibly challenging to find directional bets with any degree of confidence. So, with implied volatilies elevated across the board, today we're hunting for another delta-neutral premium selling candidate.
And this time, we're doing it on an individual stock.
Markets continue to be "messy" and it's tricky looking for positions to take aggressive stances in. And with VIX hovering at or near the 30 level for the better part of the past week and a half, the option trader in me continues to look for opportunities to sell premium.
A smarter man than me once told me: "If something is working, find ways to do MORE of it!"
Well, selling premium on balance has been working pretty well since January, so...
Chatting with the team this morning, one pocket of strength we identified that has been holding up relatively well in this slop is the banking sector. And while there weren't any individual names we were willing to bet the farm on, the financials sector ETF $XLF caught our attention as a good possible candidate for a delta neutral credit spread.
No, it’s not April 15th just yet. But I’m getting into that zone where I need to start sending relevant info to my accountant to get the ball rolling for my 2021 tax return.
I hate that I have to farm out my tax return preparation to a professional in order to get them done. I wish the US tax code wasn’t the way it was – who doesn’t?
But let me relate a little story to you that might get your mind right about whether or not to go it alone when doing your taxes…
I don’t remember the year, but it was somewhere around 2003-2004 when I first moved to Chicago. I had been using an accounting firm to prepare my tax returns since I began trading in 1998. But this year, I thought to myself:
“Sean, you’re smart. You’re college-educated. You almost minored in accounting, and you had straight A’s in all your accounting classes. You should be able to handle the filing of your own taxes!”
So I don’t remember if it was out of an act of curiosity, boredom, or just trying to pinch a penny, but I decided that year I’d prepare my own taxes.
If you've been following our narrative this week, you know we've been preaching patience as the stock market is most decidedly in the "chop zone" right now. Me and JC did a live twitter stream on Wednesday afternoon discussing the situation and how we don't feel compelled to force any new trades.
That is still the situation. But one name that I've been watching for a delta-neutral credit spread has moved in the last two days in a way that gives me a little more confidence that now may be a good time to get involved.
In Major League Baseball, the 40/40 Club is an exclusive group of players who are the only ones to have achieved both 40 home runs and 40 stolen bases in the same season.
The first player to achieve this milestone was Jose Canseco in 1988 as a member of the Oakland A’s – back during the “Bash Brothers” days with his steroids pal Mark McGwire.
Since then, only three other players have joined this list: Barry Bonds (1996), Alex Rodriguez (1998), and Alfonso Soriano (2006).
Here at All Star Charts, we’ve achieved a little bit of our own 40/40 dynamic as JC celebrated his birthday this week and joined me in the 40+ crowd of awesomeness. Perhaps it’s not quite as exciting as crushing home runs over the wall or swiping second base against catcher Yadi Molina. But I like to think it’s cool in its own way.
