There's a trade perking up from the most recent Hall of Famers report that is ready for us to get involved. We're going to do it via a debit option spread with defined risk and a chart level that keeps risk manageable.
And when I do, I usually suffer the consequences – almost without exception.
But today is one of those exceptions. Thankfully.
Recently, in an effort to fade the rising volatility in the options market arising from the 3-4 week pullback from recent stock market highs, I sold naked puts in a large cap stock – Occidental Petroleum $OXY.
I like the name for a number of reasons, the most prominent being that Warren Buffett (Berkshire Hathaway) has been acquiring large blocks of stock just below current levels. This is support.
So when the broader markets were continuing their slide a couple of weeks ago, I felt $OXY was a high probability bet to hold these levels until the mini-market panic cooled off, and selling premium via $OXY puts seemed like an intelligent way to play it.
Stocks continue to be slippery with the S&P 500 down 6 out of the last 8 trading days.
I'm in the camp that this is a constructive pullback after a fantastic run to kick off 2023. JC has been pounding the table all month about how sloppy, digestive trading action in the month of February is perfectly normal market behaviour.
With February drawing to a close soon, I wouldn't be suprised to see this downdraft exhaust itself soon. As such, I'm going to make a tactical bet that a leading name in the banking/finance sector is going to hold these levels and potentially lead the way back to 2023 highs.
Slippery markets make for rising options premiums. And one sector ETF is currently rising head and shoulders above the rest, offering some juicy premiums for us to sell into along with a wide risk management band for us to dance in.
So let's take advantage of the rising fear in this sector for an opportunistic trade and potentially quick profits.
In the options market, summer flights priced in Boeing options are pretty cheap right now.
I think I'll be looking to take a flight to a fun European destination if I can get a bullish position in Boeing to pay for it. Maybe I'll even fly on a Boeing jet?
During our analyst meeting this morning, we kicked around a few bullish ideas, but it was this Boeing $BA chart that rose to the top:
We're going to get involved with a bullish options spread that gives us through the summer to most efficiently express this thesis.
Strazza and I did The Flow show earlier this week in which one trade that stood out and caught my interest was a juicy short squeeze candidate.
Checking back on it today, the stock still maintains a short position greater than 20%. That means more than one-fifth of all shares outstanding are held by people with a short position. And if this stock starts busting higher, the only way traders holding a short position can end the pain is to buy the stock.
This can potentially fuel a rapid rise in share prices (see: Gamestop $GME circa early 2020).
I'm certainly not calling for a repeat of past meme stocks short squeezes here, but in this case, we've got a stock that's chart is in the middle of completing a beautiful base and short holders are no doubt keeping their fingers near the trigger to exit this position quickly if we see some follow thru to the upside.
Whoa baby. This might be a fun one. Or not. Either way, we'll likely find out pretty quickly.
Chinese stocks continue to offer up interesting opportunities. And today's trade is no exception. And to play it, we're going to do it in a fairly aggressive manner, but with a tight risk management stop.
We're already long some domestic semiconductor stocks via options (the trend is working). However, perhaps we've set our sights too close to home.
International stocks have been on a tear recently, showing even greater strength than the U.S. So maybe we should be looking for the strongest stocks, in the strongest sectors, in the strongest countries?
With this in mind, today's trade takes us to Switzerland.