Expert technical analysis of financial markets by JC Parets
The speculative fever is returning in a big way.
Today’s trade is in one of those names that has already benefited from the recent surge in stocks and crypto prices and is likely to continue thriving if this brewing mania is here to stay for a while longer.
Here’s something we don’t do very often — we’re going to patiently leg into a position.
Bottoms are a process, and we’re taking a position that is betting on a turn on a much-maligned overseas market.
We think the turn can be messy and sloppy sideways for a little longer, which will allow us to get better prices if we go into it with a plan. [Read more…]
Like the Energizer Bunny, the bull market just keeps going…
Who am I to fight the trend?
Today’s trade is a stock that has been consistently traveling the path of least resistance higher and we’re betting on that trend continuing.
With bullish setups continuing to climb this week, I like the cushion this gives me to continue putting on some bearish bets to help smooth out any possible portfolio volatility that may be on the horizon.
Today’s bearish “hedge” is a short bet in a technology name that is most definitely not keeping up with its peers. [Read more…]
Today’s trade is in a steel sector name that recently poked its head above a resistance level that had been capping the upside for over two years now.
As the stock consolidates its recent breakout, options premiums are quite low, offering us the opportunity to position in some longer-dated calls for a simple bet on higher prices. [Read more…]
On today’s special Tuesday edition of The Flow Show, Steve Strazza and I worked through a couple of trade ideas.
The one that feels more urgent to put on today is the trade in Sea Ltd. $SE. Here’s the chart Steve shared in the show today:
We think a fill of that gap below 55 might be just the thing this stock needs to mark this year’s low as a more permanent cycle low. And this stock has shown the potential for big moves in the past.
We’re going to use this elevated options premium as a way to finance the purchase of call options:
And with two earnings reports scheduled to be released before these options expire in June, we’ve got two catalysts that might send this stock higher.
Here’s the play:
I like entering a Bullish Risk Reversal in $SE, selling short the June 35 puts, and using these proceeds to purchase an equal amount of June 65 calls. Combined, the two trades should yield a small net credit of around 50 cents. And this credit is ours to keep if $SE goes sideways and closes above $35 per share at June expiration.
Of course, we’re not in this trade just to earn 50 cents. We’re in it to be owners of the June 65 calls at no cost to us.
That said, because of the naked puts, this position will require margin (about $3500 per one-lot), and we are subject to theoretically unlimited downside risk. So we’ll be very mindful of this position if it does not behave.
If we see $SE close below $41 per share, that will be my signal to reduce my open risk. I will do so by purchasing June 30 puts to define my risk. If $SE continues even lower and sees a close below $37.50, that’s my signal that we’re early or wrong and I’ll look to close the entire position to protect against any further losses.
Assuming no closes below $41 and 37.50 happen, then I’ll continue holding the position into June, knowing that the worst-case scenario for me is I simply keep the 50 cents premium for my troubles, but I’m holding the potential for unlimited upside with the paid-for June 65 calls.
We’ll review this trade during our free weekly Options Jam Sessions on Stock Market TV in the coming weeks as any of the above milestones come into play.
If you have any questions on this trade, please send them here.
If you missed last week’s video Jam Session, you can catch a replay on Stock Market TV.
P.S. We do trades like this regularly. If you’d like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free! Or give us a call to learn more: 323-421-7910.
I believe the options market is underpricing the possibility of a downside surprise following earnings coming up in Hormel Foods $HRL.
So we’re going place a long-shot bet that will pay gluttonously if we’re right. [Read more…]
Healthcare continues to lead to the upside. While we already have a bullish bet on a sector ETF, it’s time for us to drill in a little deeper in search of more beta if this trend is going to continue.
Today’s trade is in a name that has been performing great off its December lows and has also been in a longer-term bull market. But only just recently has it begun to outperform against the broader stock market.
Check out this chart of Merck $MRK: [Read more…]
