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.
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.
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.
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.
While the stock market continues to digest its recent run and weave through this sideways consolidation, we're starting to get some pretty clear hints on which stocks will likely be leaders if/when the bull market resumes.
Today's trade is an early bullish bet on one of those names.
Ok, that's a stupid question but I'm out of pithy headlines.
When the market more or less is only offering you one style of options trade that makes sense in this environment, things might get a bit monotonous around here. And when that happens, my brain offers up 'dad joke'-level headlines :)
But there's nothing boring about making money and our delta-neutral credit spread trades continue to work. So we're continuing with them with today's trade.
The hunt for premium selling opportunities continues. And today's trade is in a name that is heavily weighted in the Home Construction sector ETF, where options premiums -- sector-wide -- are a bit more elevated than the rest.
Thankfully, October options expiration happens the week before this company releases its next quarterly earnings report, so we don't have any of that event risk to worry about.
But this isn't really about Philip and his cancer sticks.
Instead, I'm going to sell premium in his Philip Morris stock options, betting on the company going nowhere for at least the next month.
First up, look at this chart:
We can clearly see the range contracting all year in $PM. Given what the broader stock market is doing, my bet is this range contraction continues.
Now the wrinkle we have to deal with is that Philip Morris is slated to release their next quarterly earnings statement on October 19, which is ONE DAY before October monthly options expire! That makes it tricky to be selling premium in the regular monthly options.
But the good news is, we can select the October 13 WEEKLY expiration options to express our trade.
We're adding another bullish leg to an existing position we already have on the books in Google.
In early May, we purchased December 120 calls that have performed nicely for us. In fact, we already sold half of our position and are #FreeRiding on the remaining portion of that initial trade. We can't lose!
Given the price action and relative strength we've seen in $GOOG this summer, we're ready to put on another fresh position to take advantage of even more upside.
As I mentioned last week, we're in an environment where we want to be collecting delta-neutral options premium. Unfortunately, we can either pick instruments that are in well-defined ranges or we can sell high implied volatility, but it's getting increasingly hard to find both.
With this in mind, today's trade is in an instrument where options pricing may not be as elevated as it was earlier in the year, but it's still giving us a lot of room to be wrong.
