There's a time to be aggressive and go for big gains, and there's a time to shoot for higher probabilities with smaller payout potentials.
I'm finding it hard to muster any conviction to go either long or short right now, as I can make compelling cases for both the bull and the bear thesis here.
In today's tape, my feeling is we need to err on the side of being too conservative and trade with a margin of safety.
So today, we're putting on what I feel to be a conservative, delta-neutral options trade in the technology sector ETF $XLK.
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.
The markets are telling us it still wants sideways for longer.
We know this script, and we know it's been working. So we're going to keep chopping this wood until the markets tell us to get more directionally aggressive.
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.
