I got all excited when Russell 2000 -- as measured by $IWM -- broke higher out of the 8-9 month range back in early November. To me, that felt like a big sign that stocks on the whole were about to go on a big bullish run into year-end.
Well, the sad trombone has been played and the breakout was short-lived. And as you can see from this chart, $IWM in recent weeks has completely retraced the breakout and has fallen right back into the middle of the previous range:
Man, what a letdown --- for the bulls.
But us options traders over here smell an opportunity!
JC and I traveled to India together a couple years back to meet with Indian prop and options traders and to lead discussions at a few events. It was an amazing experience to be able to view risk through the eyes of traders that come from very different backgrounds than our own.
It should go without saying that we indulged (perhaps overindulged?) in the local cuisine. To be honest, we ate like Kings and it was wonderful. Everything we ate was fantastic and I want to go back as soon as possible. It was such a great time with great people.
So, when perusing the latest crop of new ideas cranked out by ASC team, one name with an Indian flavor caught my attention.
Given an opportunity, JC will gladly talk your ear off about proper wine pairings for your Thanksgiving meals. No matter your flavor or preference, JC can find something that works. After all, he did get his sommeliers certification.
During this morning's analyst meeting, we were discussing what trade we wanted to put on today and we had two great ideas. We debated the merits of each, and we couldn't decide which one we liked best right now.
Stock 1 or Stock 2?
Bills or Dolphins?
Gators or Hurricanes?
Cats or Dogs?
And then in typical JC fashion he said:
Why not both?
And my response was: "Of course! Why not? We'll call it a Thanksgiving Pairing!"
This past weekend, I finished reading an illuminating book titled "Empires of Light" (see what I did there?), that dug into the origins of modern electric power as viewed through the lens of the first titans of industry to bring it to the masses: Thomas Edison, George Westinghouse, and Nikola Tesla. It was a fantastic read. And one that hit home due to the fact I grew up less than 20 miles away from Niagara Falls, a location which figures prominently in the birth of the nation's electric grid and modeled how to spread electricity transmission throughout the world.
So, it must be kizmit that the best idea on the table for me to choose from today comes from the energy space -- a $170B company that generates, distributes, and sells electric power to customers in North America.
Wednesdays are becoming my favorite trading day of the week.
What the heck is so special about Wednesday? Well, nothing really. But it's the day when all the All Star Charts analysts converge on a weekly internal zoom call and throw out our best observations and ideas. We start identifying themes. What's new? What's old? Where aren't people looking? Where are our blind spots? What would have to happen for us to change our view? What's the best music to listen to while charting and strategizing? (I prefer anything instrumental -- no singing).
Now, to be fair, when the nerds start geeking out about currency pair relationships and long-end versus the short-end of interest rates, that's when I pretend to be listening and interested. But when the conversation comes back around to individual stocks, that's when my ears perk up.
So, today, when it came around the horn to me, I mentioned to the guys that I'm really liking this setup in Valvoline $VVV that the team highlighted in their most recent Young Aristocrats report.
A stock recently got on our radar after share prices exploded higher following a recent earnings report.
Now that the market has given players in this stock some time to marinate in the new reality presented during this last quarterly report, options premiums are beginning to return to normal (ie "low") prices. And this is making it more compelling for us to position for what we feel is another leg higher.
Well, once again we saw a little downside action this week and the noise-makers on the twitter and the teevee got all revved up. Cool. Whatever drives clicks, you maniacs.
Meanwhile, those of us who keep our heads about us while others are going insane are looking for opportunities to sell some premium into the somewhat elevated volatility premiums we see in options during times like this.
So, I did my periodic scan across the ETF landscape to see which sectors were sporting the highest relative implied volatilities while also showing the potential for rangebound activity over the next several weeks.
That's right, I'm on the couch, settled in for a nice rom-com with the wife, passing the chip dip, and thinking about the stock dip I'm about to buy.
Sometimes, this is where and when my best ideas hit me. How about you?
But in the case, it just so happens the All Star team was already one step ahead of me on today's idea as they covered it in their recent Monthly Charts Strategy Session last week. At least now I get to enter at a better price!
I'm already groaning at the Dad Pun I'm trying to pull off here with this post's title.
The team put out a new The Short Report highlighting stocks that are ripe for getting short. Yes, we might be in a bull market, but its a "market of stocks" and if you look hard enough, you can always find stocks going in either direction, regardless of the macro market environment.
And the idea from the report that stands out best to me is now the victim of my bad pun.
Ok, so technically Microstrategy $MSTR is not a bitcoin ETF.
But for those of you paying attention to this space, you know that the CEO Michael Saylor has gotten very long and very loud about his company investing significant portions of its operating capital in Bitcoin. And because of this, the share price of $MSTR stock has since become highly correlated to the price action of Bitcoin.
We were chatting about it this morning and the one thing the team all agreed on is 10 years from now, Saylor is either going to go down as the Greatest Fool in History, or, The Greatest Investing Genius in History. There's really no other outcomes here for him. And you know what? I say cheers to you, Michael Saylor! Way to put your cohones on the line for something you so passionately believe in. Your investors will either one day elevate you to Sainthood or sue you into oblivion. Godspeed.
We've got our popcorn ready and we'll be watching!
Anyway, all of the above makes for fun coffee table conversation. But we traders only care about the price action and how we can profit from it. So let's get right to it.
