It appears that “Meme Stock Mania” is back. Or we’re at least having an echo moment.
Cool. I’m all for it!
Whatever leads more sheep to slaughter, the better for those people who trade with plans and logic. People like you and me.
If we learned anything from the last go-’round, remember that it’s very hard to control our risks in these mania stocks – especially when we have to deal with trading halts that may or may not resolve in the direction we desire.
Fortunately, options traders have a unique and specific advantage over common stock traders – we can PRECISELY define our risks. Of course, this privilege comes with a cost: high options premiums.
In today’s Options Jam Session, I revealed my itchy feeling that stocks are on the cusp of “popping” higher. Looking at charts of $SPY and $QQQ and $WFC has me thinking that there’s a pile of tinder just waiting for a spark to ignite.
What will be the trigger that gets this wildfire in motion? I don’t know.
But I’m positioned for it with a good variety of sector, time frame, geographical, and time frame exposure.
Click through to see me review many of our open positions that are likely just getting a head start on the coming breakout…
An All Star Options member recently asked me to explain what “short interest” meant.
This is a hot topic at the moment because there have been a few setups I’ve entered trades into recently, precisely because short interest levels are high.
So what is “short interest”?
According to chatGPT:
Short interest refers to the total number of shares of a particular stock that have been sold short by investors but have not yet been covered or closed out. When investors sell short, they borrow shares of a stock from a broker and sell them with the expectation that the stock's price will decrease. They then plan to buy back the shares at a lower price, return them to the broker, and pocket the difference as profit.
No setup gets me more excited than buying a fresh new all-time high.
There are no bagholders looking to unload their losing position to breakeven. Every investor or trader holding a long position is making money. And every trader holding a short position is losing money and the only way they correct that sad state of affairs is to buy stock to stop their losses.
In other words, blue skies above.
This doesn't guarantee success on a long trade here, of course. But these are the types of trades that commonly lead to my biggest gains.
Here's a weekly chart of semiconductor name Analog Devices $ADI:
Today's trade is in a name that currently sports a 15% short interest which equates to approximately 7 days to cover. This could be significant fuel for a blast off if the current post-earnings momentum propels this stock above 52-week highs.
The countdown to launch is ticking, so lets get involved.
There's been a lot of "bad" news thrown in Tesla's direction this year. And it's played out in the stock's price. But here's the thing -- bad news is often the worst at the bottom.
And zooming out on a longer time frame, it looks like $TSLA shares may be beginning to turn the corner.
The dramatic decrease in volatility ($VIX is a good proxy for this) across the board over the past ten or so trading days is taking the starch out of my inclination for looking at delta-neutral options credit spreads. It’s getting harder to find good candidates. They are still out there, but I need to be more selective.
That said, I am open to getting long select names here. But the types of setups we’re more likely to find are ones where stocks come off nicely formed bases, rather than breaking out through key levels of resistance or all-time highs.
It doesn’t mean these setups are any more or less likely to work, it just requires a different mindset and tools.
Luckily the options market gives us a lot of tools.
I discuss this in today’s Options Jam Session, as well as a teachable lesson in a trade that got away from us:
I'm mindful that coming into this afternoon's Fed meeting lots can change following whatever is said after 2pm ET.
That said, there's a pretty compelling opportunity to sell some premium in the gold space, at strikes that are comfortably far away, increasing our odds of success.
My family and I recently embarked on a memorable 4-day journey to Redwoods National & State Parks in the breathtakingly rugged landscape of extreme Northern California.
Words alone cannot do justice to the majesty of this region, nor can mere photographs fully encapsulate its grandeur. To truly grasp its magnificence, one must stand amidst the towering coastal redwood trees, with the rugged shoreline of Northern California stretching out before them, enveloped in the sights, sounds, and scents of one of the most remarkable forests on Earth.
Even the gentle rain that occasionally graced our adventure served to enhance rather than dampen our experience, intensifying the assault on our senses in the most fulfilling manner imaginable.
As we spent hours traversing the labyrinthine trails, venturing deep into the heart of the woods, a recurring reminder echoed among us: "Don't forget to look up!"
In today's Flow Show, Steve Strazza laid out the case of how both the Nasdaq 100 and Chinese tech stocks (particularly Chinese internet) might be signaling an important rise in speculative appetite which could fuel the next bull run.
Of the names Steve shared, the one that made the most sense to me was JD.com $JD. Check out this chart:
