On today's Flow Show, me and Steve Strazza put our heads together to follow the wave into the Steel sector.

Sector trends are showing us where capital is flowing and that led us to a trade idea in steel manufacturing company Reliance Inc $RS.

Here's the chart highlighting a high consolidation that often portends to rapid near term price acceleration:

For those of us who are comfortable with risking higher dollar amounts in trades, I'd be a straight buyer of the September 350 calls.

But I prefer keeping my costs a little lower per unit of risk, so I'll be employing a call spread here to express our bullish opinion.

Here's the Play:

I received a great, and well-meaning question from a new All Star Options subscriber about a recent trade we entered in $VLO that offers a great lesson or reminder to those who need it.

Question:

What...

Every once in a while, I’ll put on what I call “all or nothing” trades.

What this means in practice is that I’ll put on a defined risk options trade knowing full well that the trade is either going to net a profit, or it’s going to be a zero – a full loss of invested capital. There’s no in-between.

Usually, this happens because I love a setup, but the price level on the chart that would invalidate my thesis is pretty far away. If we get there, it’s more than likely that whatever premium I paid to enter the trade will have nearly evaporated. There will be nothing left to sell, even if I want to.

Two trades with March expiration options have concluded for me this week that demonstrate the yin and yang of these types of trades.

On Feb. 14, I put on a bearish bet in Hormel Foods $HRL. I bought the March 25 puts for 15 cents. This trade was put on at a time when I was looking to add some bearish exposure to my portfolio to help balance out the heavy long exposure I had in other...

Steve Strazza and I hosted another Flow Show today on Stock Market TV and discussed opportunities in the Biotech space.

Starting at an index level, we see that biotechs are clearing a base and appear set on breaking out:

From there, we started diving into some individual biotech names to play the breakout, but many of the charts offered unique challenges that made it tricky to pick one to take the most advantage or the sector breakout.

So when that happens, sometimes the best move is simply to buy the index!

And that's what we're going to do here, using the sector ETF $XBI as a vehicle for expressing our bet.

Here's the Play:

From the desk of Steve Strazza @Sstrazza

Our Hall of Famers list is composed of the 150 largest US-based stocks.

These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.

It has all the big names and more.

It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that. Click here to check it out.

The Hall of Famers is simple.

We take our list of 150 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.

Let’s dive right in and check out what these big boys are up to.

Here’s this week’s list:

*Click table to enlarge view

We filter out any laggards that are down -5% or more relative to the S&P 500 over the trailing month.

Then, we sort the remaining names by their proximity to new 52-week highs.

This leaves...

I’m reading Annie Duke’s latest book “Quit: The Power of Knowing When to Walk Away.” Though I’m only about halfway through it I can already confidently recommend this book to traders.

The book isn’t addressed to traders, though it frequently references our profession in its anecdotes and many of the stories are very relatable.

And it certainly has me thinking about better ways to decide to quit a trade, quit a strategy, or quit a product.

I frequently go down rabbit holes, experimenting with models to extract consistent, repeatable, acceptably risk-adjusted returns via index options. I’ve written about my near-constant...

This morning, my Head Technical Analyst Steve Strazza joined me on The Flow Show to put our heads together on a new trade:

Strazza loves the Energy sector here, and of all the charts he likes, I liked this one in Valero Energy $VLO the best:

Best of all, options premiums are near the lowest levels of the year for $VLO:

This isn't entirely surprising. The stock has been consolidating just below all-time highs since early 2022. And the consolidation has been continually tightening.

Sideways markets may not stop you out of your positions, but they are likely to wear you out. And when traders are exiting their positions giving up on the thought of any directional movement, options premiums tend to decline because few participants feel the need to protect their positions or aggressively bet on accelerating...

What if I’m wrong?

I get ideas. Sometimes crazy ones.

I see something in the charts, or read something in the news, or listen to something on spaces and it triggers me into taking action.

Sometimes I’ll take aggressive actions because this idea I have – wherever it came from – is something I feel strongly about. I feel that the odds are heavily stacked in my favor. Or perhaps the payoff, if I’m right, can be so overwhelmingly profitable that it’s impossible to ignore.

We all have these feels about certain trades we’re in from time to time, right?

We get excited. We get optimistic. We start counting our winnings before they’ve even hit our account. It becomes impossible not to daydream.

There’s nothing wrong with any of this.

But what if I’m wrong?

Many swing traders and investors are currently sitting on a First Class problem. But it’s a problem, nonetheless.

These traders are sitting in positions with huge open profits.

I can use NVDA as an example. But there are many, many big winning trends still acting well.

Those of us who like to style ourselves as Trend Followers will soon be faced with a difficult decision – how and when to determine when a trend has ended.

It’s easy in hindsight to look at a chart and spot the moment a trend was invalidated and an optimal exit price is clear. But in real-time, it’s not so easy. In fact, it’s impossible. Because contrary to popular belief, no trader can reliably and consistently predict the future.

But the stakes...