I don't know about you, but I'm super excited for this coming year. I'm expecting volatility in both directions. And volatility = opportunity for options traders.
That said, let's not rush into anything. I know... if you're like me you're itching to start firing off trades.
But as the opening 90 minutes of trading has showed us so far today, things can get slippery fast as people and institutions start putting money to work and rotating money around in often sloppy fashion. This is pretty typical in the first couple trading days of any new year.
Me, JC, Steve, and the rest of the All Star Charts team were casually chatting during our weekly strategy session and Steve asked me: "What was our biggest options winner this year?"
Without a doubt, our best options trade in 2020 was long Peloton $PTON. We entered long October 60 calls in $PTON on June 17 when it was trading below $52 per share. The stock then went on a rocketship ride and touched an all time high north of $139 per share on expiration day Oct 16th, which we rode all the way. It rarely happens that we hold a long calls position all the way into expiration day, but the last 3 weeks saw barely a downtick, so there was never any reason to hit the escape hatch.
As we further discussed this, it hit me and I remarked to the guys that "What's your biggest winner?" is a bit of an unfair question. I don't think 2020 was a good year because of a handful of big winners. They certainly helped, but the real reason why 2020 was so successful was because PROCESS was our big winner.
As January gets under way, it’s time to review positions with January options that remain open (haven’t already hit profit targets or been stopped out). I'm getting started a little earlier this month because January expiration is on the 15th, and we're currently only 18 days until expiration. I don't want to wait through another long weekend before taking action. That's cutting it too close to expiration for my taste.
Most trades I put on for All Star Options tend to have a minimum duration of 30 days (short premium plays) and often as long as 6-8 months (for long premium plays). As options approach expiration, greeks like theta and gamma start to become my enemy and whipsaw my P/L. Therefore, as options and spreads get into the expiration month, my best practice is to put each position on notice — it’s time to take action.
Wow, after a few months in a row of not much to worry about heading into expiration, this month will keep us busy. At the time of this writing, I've got 5 positions that need continued monitoring (thankfully they are profitable) and a few that need to be closed now.
The team at All Star Charts has launched a new report called the Minor Leaguers Report. This report will highlight small stocks showing signs of making the jump to the Big Leagues!
If the success of the Under the Hood report is any indication, I for one am very excited to have this expanded universe to pick stocks for making options plays.
Many of you know that one of my favorite bullish setups is a stock making new all-time highs, with $100 per share within our sights. So many times stocks are attracted to that big round psychological number. It doesn't make any sense (like stocks rallying on the announcement of a stock split), but we don't care. It's something we've observed time and again and betting on a stock getting there is practically money in the bank.
While $100/share is typically where we see this behavior, the same principle holds when a stocks approaches $200, $300, $400, etc.
With this in mind, a stock mentioned in recent Under the Hood report is finally popping today and we're getting involved.
It's that time of the year when shopping is on everyone's mind. I don't know about you, but my house has been under a mini panic as we scramble to make sure everyone's gifts are accounted for as he head into the final week before Christmas.
Clearly, this scene is playing out in households all across North America and it is being reflected in the share prices of online shopping venues.
The Energy sector has had some interesting moves in both directions in 2020.
Sell off with everything else in March. Hard bounce with everything else in the Spring. Then a slowly accelerating slide into mid October where it caught another bounce.
But what's notable to me is that the down move which ended in October did not undercut the March lows, and the current recovery seems to be running out of steam below the June highs. Feels to me that Energy, and it's $XLE sector ETF is consolidating.
JC published a bullish piece on Japan today. He's been pounding the table on the potential for a massive base breakout for some time. He's so exited about it, we even traveled to Tokyo last year to see what's going for ourselves!!
One of the names he mentioned in the post stood out to me and I'm willing to step in and take a position.
2008-2009 was a dark period for the banking industry. The "Financial Crisis" nearly brought the whole system to its knees. Stocks in household name banks became penny stocks (Citibank!), Warren Buffet had to rescue Goldman Sachs, and a few had to put themselves up for sale (Merrill Lynch), or even became extinct (Bear Stearns, Lehman Brothers).
For some long-term investors (and former employees in this sector), this is still a fresh wound.
But charts in this sector are starting to tell a different story.
Few things take the mind on a flight of fancy like the thought of interstellar space travel. Who hasn't taken a look at the night sky and wondered what's up there?
Richard Branson took a look and wondered the same thing. Only, he decided to try to make it happen. Enter: Virgin Galactic, a company looking to open up space for recreational travel.
Investors seem to be willing to bet along with Sir Branson that humanity with believe space travel is a worthwhile exploration. This chart here shows $SPCE on the verge of emerging from a 10-month base. And as JC often says: "The bigger the base, the higher in space!" And that couldn't me more appropriate than here.
One thing you'll read between the lines in nearly everything we do here at All Star Options and allstarcharts.com: We stick with winners. We ride trends. We get long relative strength and we get short relative weakness. We don't overcomplicate things. We don't need to be the Hero who shorts a parabolic stock at its zenith, or buys the oversold stock at its generational bottom. Those trades make for sexy stories, but that graveyard is a mile wide and 50 feet deep.
With this in mind, here's an undeniable leader that is setting up again:
As Steve Strazza was putting together the latest "2-to-100" report, he and I were chatting about his latest great stock idea. He is pretty excited about this one, and who am I to not join him?
