Traders woke up Monday morning to a little reminder that volatility happens.
It certainly wasn't a calamity, but it was a larger gap down opening than we've seen in a while, following an ugly close on Friday which certainly has put some traders on edge.
When these types of conditions arise, we often see implied volatility priced into options rise to meet these increasing levels of fear. And today is no exception. On days like today, I like to peruse the list of active ETFs and see if any elevated implied volatilities are offering up a good income trade candidate.
The one that tops my list also has a nice risk management level we can lean against.
We've had a couple picks from our recent Young Aristocrats report that I've liked for options plays. But I waited on this one until today because we needed to get earnings out of the way.
The good news is, the post-earnings report reaction was muted and the setup remains intact, so we're ready to take action.
It isn't often that we put on trades where we are explicitly swinging for the fences. But an opportunity has presented itself in the lastest Young Aristocrats report that is offering up an all-or-nothing reward to risk scenario. If we're wrong, we'll likely lose 100% of our capital. But if we're right? We could potentially make 6-10x our investment. I'd like to think the All Star Chart team's conviction on this trade tilts the odds in our favor a little bit.
What's interesting (at least to me), is that the play is in a name with exposure to water. Yes, water. The earth's most abundant, yet precious resource. I've always daydreamed of someday making a killing with long-term investments in water rights and so forth. I'm not there yet, but maybe this play will jump-start my exploration.
JC put a post up today taking a look at the Semiconductor sector. As a group, the sector is looking poised for a breakout and he goes into some of the even better looking charts for individual names that make up the sector index. Give it a read.
His favorite idea from the group is one that I can get behind, especially in light of the price action over the past two days. It feels like now is the time to get involved.
The latest All Star Charts "Follow The Flow" report is out, and once again there's a great looking opportunity there that caught my eye.
In a nutshell, the Flow report is looking at "a list of stocks that large financial institutions are putting big money behind (via options)… and they’re doing so for one reason only: Because they think the stock is about to move in their direction and make them a pretty penny."
The opportunity setting up now is in a stock in a sexy sector that looks like it's ready to resume the rocketship ride it embarked on in 2020.
Once again this month, I’m going to share info on positions that were closed in the month of June. As a reminder, our exit plans are always laid out ahead of time in each trade idea we publish. In every case, the exits mentioned below were all in accordance with the plans as laid out.
As we head towards July expiration, we have six open positions remaining with expiring July options.
Whether you know it or not, we're all exposed to risk from the financials sector (think big banks, GE, etc).
And when I look across the positions in my portfolio, I have significant open exposure on the long side of the market.
This is top of mind for me right now, coming out of our weekly team call. The recent sloppy market action, with no real expansion of new highs, is opening the door -- if ever so slightly -- for the bull market doubts to creep in. We are certainly not making a "Top" call here by any means, but we are observing that the risks of a potential correction appear to be increasing.
So, while we don't need to get aggressive with short bets here, it might be prudent to start exploring some bearish setups and keep our eyes and minds open for opportunities to get tactically short in names and sectors that would likely lead on the downside if the broader markets were to stumble here. And we can do this without exposing our portfolio to too much risk, thanks to the existence of long exposure already on the books.
I've always wondered -- can publicly traded advisory and consulting services recommend the purchase of their own stock to their clients? There's probably a rule against this. Certainly, it would be in an ethical gray area.
That's too bad, because the ASC team recently surfaced a $20B market research and advisory group stock during their research and the chart looks like a fantastic setup.
Every so often I like to put on some delta neutral credit spreads to balance out the portfolio a bit. It's all about diversifying the books so that I'm not solely reliant on direction or volatility. We've got positions on currently that will benefit from big moves in either direction, but what if the market just grinds sideways for a bit?
This is where some delta neutral credit spreads can help out.
And my preference is to initiate these trades in liquid ETFs that are exhibiting relatively high implied volatilities.
There's nothing more gratifying than watching our youngsters graduate to the next level, cheering on athletes who advance through the ranks, or enjoying the ride of our investments moving from "small cap" to "large cap" during our hold.
The 2 to 200 Club report that the All Star Charts team produces attempts to give us the heads up on the next companies that are likely to make the step up to the next level. You can read our latest report here.
One of the names that caught my attention is one involved in data analytics utilizing Artificial Intelligence to drive performance.
We're going to start taking full advantage of the data coming out of our weekly Follow the Flow report and put on at least one actionable trade from this list every week. If you're not already familiar with this report, Steve Strazza puts it together each week and it highlights stocks with both unusual options flow plus interesting chart setups. Combined, these two factors offer traders a pretty unique edge to exploit.
Today's idea is in a recent IPO which might offer us some additional oomph if it gets moving in our direction.
The latest Young Aristocrats report is out and as always, there are some great opportunities setting up there. These are stocks with tremendous dividend growth consistency that are also setting up for bullish price action. How can investors not love these setups? Win from the price appreciation, and get paid while you wait in the form of dividends. Yes, please!
The opportunity that best caught my attention today is an all-time high breakout in a niche corner of the market.
