Once again this month, I’m going to share info on positions that were closed in the month of July. 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 August expiration, we only have one open position remaining with expiring August options. But July was certainly a busy month for exits -- both profitable and not -- as a couple of market whipsaws shook the trees and knocked us out of a bunch of positions.
Positions with August options that need monitoring:
As markets have gotten choppy lately, I've been on the hunt for more bearish and neutral trades to help balance out my predominantly long portfolio.
In this week's Follow the Flow report, Steve Strazza teed up a nice candidate for some downside exposure. The beauty is, the Options Gods are lining it up such that we can affordably take an aggressively bearish position that will pay off nicely if it works, while limiting our risk if we're wrong.
The team pumped out the Saturday Chartoons letter this weekend and as always, there were some nuggets of wisdom and ideas to be found therein.
The tone overall is: we're in a tricky spot here. There are some stocks going up, many stocks going down. But in sum, we're kinda stuck in the mud here for a little bit, it appears.
Of course, if this continues for a bit, then we'll want to keep our eyes out for more delta-neutral credit spreads to add to our portfolio.
There's one sector ETF that was specifically highlighted in this weekend's letter that fits the criteria I look for.
So Steve Strazza hit me up yesterday with: "Have you seen our latest 2-to-100 Club report? All of those stocks are breaking out!"
When Strazza gets giddy about price action, I take notice. Of course, I had to pull it up and scan the list. And sure enough, every one of those names is moving in the right direction. Some already moved so quickly that I'm going to hold off for a better possible entry point. But one of those names just triggered yesterday and is giving us a well-timed pullback today for us to get positioned.
In the recent All Star Charts monthly conference call, one of the themes that were repeated often was that stocks are in a "hot mess." In other words, many sectors are a bit stuck in the mud, offering very few signals or hints on the next direction. And when stocks aren't offering us many clues, the likely conclusion is that we'll go sideways for a while. It might be choppy, but the net result will be a whole big bowl of nothing.
With that in mind, it pays to look for opportunities to take advantage of stocks or ETFs that have somewhat elevated implied volatilities (meaning options are richly priced) and put on delta neutral credit spreads. We already did this earlier this week, and we're going to continue with another similar trade in a wildly different ETF.
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.
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.
