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Calendar Spreads Offer Three Ways to Win in this Current Environment

September 25, 2018 by Sean McLaughlin

Sticking with a theme we’ve been discussing with All Star Options subscribers for the past month or so, we expect to continue keeping things simple around here until the market tells us it’s time to change.

One way we’ve been keeping things simple is to be buyers of straight long call options. It’s still a bull market in spite of what gets shouted to you on TV, and volatilities continue to be low — pricing options relatively cheaply. So as long as the volatility in any individual name is still cheap, we’re always going to be looking at long slightly out-of-the-money call options to participate in bullish plays while affordably limiting our risk.

One variant of this play that also holds a lot of interest for me — especially in higher priced names where I might wish to limit my risk a little bit more — is the long call calendar spread which consists of a short call in a near month combined with a long call at the same strike in a further out month for a net debit. It gives us three ways to win! [Read more…]

Technology Is The Big Tell Here!

September 25, 2018 by JC

There’s always a tell. Before the most recent rally we’ve seen in U.S. stocks since August, Aerospace & Defense stocks were breaking out. It was hard to be bearish equities with this A&D group, an important part of the Industrials sector, and a leader among leaders, coming out of an 8-month base to new all-time highs. Also, this came within the context of a tremendous uptrend, so an upside resolution was perfectly normal. That breakout was telling for stocks as an asset class. Today I think it’s Technology. What this sector does here should tell us a lot about this market.

After the new weightings, Technology is going to represent 20% of the S&P500, which is still a large chunk, despite being cut from 26% of the S&P500 pre-adjustments. It’s funny, strong markets do splits, not reverse splits. I’ll take this as a positive for Tech. And if it’s not, then I think we have a problem. That’s what we’re looking at here today. [Read more…]

[Premium] Our Risk Management Strategy For The U.S. Stock Market

September 24, 2018 by JC

We have been pounding the table to be buying U.S. stocks and ignoring the bearish rhetoric coming from almost everyone these days. I have never seen a stock market crash where people have been this prepared for it. I get an email a day warning me about this coming historic crash. We’ve happily taken the other side of this nonsense and continue to believe the path of least resistance is higher, much higher in fact.

However, the market doesn’t care what JC thinks and is going to do whatever the heck it wants. That’s life. So ahead of any serious correction, we want to identify levels where we would start to become much more neutral towards equities. Tightening stops, being less aggressive from the buy side, owning put protection and strategies like these are most appropriate under these conditions. Today, I’m going to lay out what it’s going to take for us to approach the market from a more neutral to bearish perspective: [Read more…]

[Options Premium] Details For October 2018 Conference Call

September 24, 2018 by JC

This is the monthly conference call for Members of All Star Options. In this call we will discuss the current market environment and focus on price and volatility behavior. Throughout the session, J.C. Parets will add commentary on the technical outlook moving forward, and Sean McLaughlin will discuss the options strategies available to profit from the market activity.

This month’s Conference Call will be held on Tuesday October 2nd at 7PM ET. Here are the details for the call:
[Read more…]

[Options Premium] Take Two and Call Me in December

September 24, 2018 by Sean McLaughlin

Sometimes I think I have a little too much fun writing headlines. But, when we’re looking into opportunities in the gaming space, I guess it comes with the territory.

We recently took a look into the newly configured Communications Services Sector and highlighted some component stocks that stand out as notable opportunities. From an options trading perspective, Take-Two Interactive $TTWO offers us the best chance for a profitable play. [Read more…]

Communications Services Sector Changes

September 22, 2018 by Tom Bruni

This week the Global Industry Classification Standard (GICS) expanded the Telecom Services sector to include Consumer Discretionary and Information Technology components, with it being renamed the Communications Services sector next Friday, September 28th.

In this post I want to highlight the major changes to the sector classifications, chart the new sector (using the back-filled IXCPR Index), and then finish up with some of the components that are the most actionable. State Street, which runs the popular Sector SPDR ETFs, has created a comprehensive document on these changes that I’d encourage you to read in full to understand all the nuances surrounding these changes.

[Read more…]

[Options Premium] A Delicious Looking Breakout

September 21, 2018 by Sean McLaughlin

With markets having a big breakout on Thursday, our bullish US equities case continues to be confirmed. And with new all-time highs usually comes lower and lower volatility being priced into options.

For the past month, we’ve been keeping it pretty simple here at All Star Options. We like simple, so it comes naturally to us. But more importantly, the market is telling us to keep it simple. When volatilities are low and charts are pointing higher, it pays to be a buyer of your friendly neighborhood call option. Options Trading 101. Being buyers of calls in this environment puts us on the other side of the trade from the pikers who fill up ballrooms and banquet halls at Turnpike Hiltons and Marriotts to learn about the latest and greatest Covered Calls Road to Riches.

You’re better than this. You’re willing to take smart risks and reap the upside rewards.

There is a time and a place for more exotic ratio spreads, iron butterflies, strangles, and straddles, but this isn’t the environment for that. And until it is, we don’t see any reason to force the issue. We’re not looking for style points, we’re looking for gains. We’re simply going to keep taking what the market is giving us. And right now, it keeps giving us wonderfully bullish setups with cheap call options. And hey… if all the doom-and-gloomers are right and this fall we’re headed for a major comeuppance, the beauty of cheap long calls is our risks are clearly defined and our costs of entry are minimal.

So let’s talk about our next opportunity… [Read more…]

All Star Interviews Season 2, Episode 6: Ryan Detrick of LPL Financial

September 20, 2018 by JC

In this episode I asked my friend Ryan Detrick to come talk about the quantitative work he does as part of the technical analysis he provides for advisors at LPL Financial. I have been following his work for years and have gotten to know Ryan well during that time. I was really looking forward to this conversation and it exceeded all of my expectations. Ryan does an excellent job of using basic mathematics to debunk popular myths told to investors about the market. We discuss the impact of a rising rate environment on U.S. stocks, the Yield Curve, Stock Market Seasonality and some of the things he is currently seeing in the market. This is a can’t-miss episode! [Read more…]