I have a Google Home at my house and we ask it questions all the time. I asked: "Hey Google, do we really need to call google Alphabet?" and she responded: "Sorry, I don't understand the question."
Yeah, me neither.
In case you've been living under a rock, Google $GOOG printed a new all-time high today (Tuesday) and continues to ignore headlines like a good soldier. And with earnings on deck, scaredy-cat options market makers are bidding up prices in options ahead of July 23rd's release. This sets up a nice trade for us.
You see what I did there? The title of this post is a play on the stock we're about to put an options play on -- Workday $WDAY. You're welcome. I'll be here all week. Tip your bartender.
It's summer time. Sometimes during dull market action we have to keep ourselves entertained right?
Well, nothing entertains me more than profitable options trades. And with earnings on the not-to-distant horizon in $WDAY, I see a scenario setting up that can get us paid for our work.
We are in the tricky part of the quarterly cycle where upcoming earnings warrant caution on options trades in individual names. Premiums get elevated ahead of the uncertainty heading into each earnings event, so that makes being long premium an undesirable idea. Meanwhile, it makes me uncomfortable getting short elevated premiums into these events because of the risk of an outsized move blowing through any short strikes I may have on.
And of course and ironically, with summer in full swing, broader indexes are seeing declining volatilities which makes it tougher to put on good credit spreads.
But your boy hasn't given up looking for opportunities, and I see a good one shaping up in the Utilities space.
Perhaps it's the overwhelming number of afflicted Bears coming in to emergency rooms, pharmacies (for pain meds), and therapists couches across America that is fueling the continued bull market in healthcare stocks? Interesting thought.
But we're not fundamentalists here, we just follow price action, volume, and with our options trades -- volatility. And those three things are pointing to a great opportunity for profits in the $XLV Healthcare ETF.
Jack Dorsey, CEO of both Square $SQ and a little-known company named Twitter $TWTR, is having a pretty good year. How good? Well, in the last 365 days, $SQ is up 177% and Twitter is up a more modest 158%. Boy, the sentiment in these two names sure has changed. It seemed like just yesterday Jack Dorsey was America's most hated CEO. "Pick one!" the masses screamed. Everyone thought he had taken on too big of a workload as the stocks of both companies languished in prolonged downtrends. Amazing what twin upward trending stock prices can do for Public Relations.
While both stocks look compelling here, we're going to take advantage of some attractive volatility being priced into $SQ options and an earnings event to play both sides against.
With two weeks to July expiration, it's time to review our July positions that will be expiring soon and take any actions that are necessary to reduce risk or take profits. This is the time of the cycle when the theta cost of our long premium plays will start to accelerate against us, or the gamma risk in our short premium plays will start to ramp quickly against us. No bueno in either case.
With earnings for Apple coming up on July 31, there's just enough time, worthwhile juice, and a significant price level to lean against in order to potentially bite off some quick profits in $AAPL while limiting our downside risk. Since we don't have much time, lets cut right to the chase...
The running metaphors for Nike $NKE stock are too obvious, so I'll do my best to avoid them. However, it cannot be denied that last week's monster gap higher coming out of earnings has launched the stock around the final turn and it is now sprinting towards a big, fat, round number - $100. That big magnet coupled with a pretty common phenomenon called "post earnings drift" following positively received earnings events sets up a pretty compelling case for a profitable move setting up.
Continuing with a theme that emerged for us this week, we're taking recent volatility climbs as a gift to help us get through a typically slow summer trading period. Weeks like this one -- just ahead of a holiday week -- are the kinds that level-headed premium sellers wait for when putting on their "income trades."
I feel like the recent minor skirmishes in U.S. stocks over the past week have been a nice little gift for premium sellers heading into what is a traditionally the slowest period of the calendar year. With the Independence Day holiday on the horizon, it's looking to me like a great time to start selling some premium in the indexes. So we've got a quick and easy one to set up before you light up your grills and sparklers.
Last week, Tom Bruni penned a post titled Global ETF Carnage Continues, highlighting how ETFs representing stock markets around the world have been getting hurt by US Dollar strength. While he isn't yet calling a bottom, there was one particular Latin American ETF that was beginning to show signs of bottoming and it is a scenario he'd like to see replicated in more global ETFs to give him confidence the turn is coming.
The best way I know how to stay engaged in this possible turn is to have some skin in the game.
