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Expert technical analysis of financial markets by JC Parets

[Options] The Right Trade for This Environment

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In today’s Flow Show, me and Steve Strazza took a look at some potential directional bets, but we both agreed that the right trade for today is one that would benefit from some sideways trading action.

With the broader markets looking a bit indecisive here, making a strong directional bet (in either direction) feels like a high-risk proposition. But there’s a big cap name currently stuck in a range that is offering us nice options premiums to bet on further sideways action. We’ll likely have to hold through an earnings event to earn our profit, but with a defined risk and a large margin for error, I like our chances. [Read more…]

[Options] Earnings Season Draws First Blood

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In today’s Jam Session, I discussed the potential for markets to hit the pause button soon (if they haven’t already) and how that’s affecting my trade selection going forward.

Considering that some of our big winners have hit or are nearing our profit targets, or have been approaching expiration, it feels like a perfectly logical place for this pause to happen. $AMZN hit our upside price objective this afternoon!

And it might be earnings season that does it.

Earnings season is beginning again, and our first earnings casualty is already on the books with Fastenal $FAST getting taken to the woodshed this morning.

What the market taketh, I hope it will giveth back via an “add-on” trade we’ve got open in Wells Fargo $WFC. It is specifically betting on earnings being the catalyst to pop $WFC higher out of a high-and-tight flag.

The good thing about both the $FAST and $WFC trades is I have defined my risks beforehand. I don’t want my trades to become worthless following earnings, but if they do, the dollar loss to my portfolio will feel like any other small loss. No sweat.

We discuss this and more in this week’s short Options Jam Session: [Read more…]

[Options Premium] Taking Advantage of Aggressive Apple Players

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Traders have made a lot of noise about the recent correction in Apple. And yes, the selloff has been large (for Apple).

But with daily trading volumes beginning to wane, it feels to me that the run has begun to exhaust itself and bears will have one more last-ditch opportunity with earnings on the horizon.

Barring something unusual, I think there will be something to disappoint both bears and bulls alike, amounting to a whole lot of nothing. Which sets up the perfect time for a sideways bet. [Read more…]

Position Sizing Ideas for Naked Short Options

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When putting on positions with undefined risk (naked short puts, or short strangles, for example), one question I often get asked is: “How do you determine your position size?”

This is perhaps the most important question to ask when putting on these types of trades!

I have two imprecise, imperfect ways that I decide: [Read more…]

[Options] Too Good to be True?

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When I was reviewing my open positions this morning, I couldn’t help but have the feeling that all good runs must eventually come to an end. Everything goes through cycles.

As I was doing post-mortems on winning trades that recently closed, and updating stops on winning trends I’m continuing to ride, a feeling of foreboding hit me that this run feels “too good to be true.”

This isn’t necessarily true, but it has felt like any long trade I’ve put on recently was destined to be a winner. If I’m not careful, I can easily cross the chasm into blind overconfidence. That’s where most trouble starts. Certainly for me, anyway.

In the near future, I’ll probably be looking for less aggressively bullish bets. And the ones I choose will likely require longer timeframes to play out. Meanwhile, I’m beginning to favor some delta-neutral credit spreads wherever I can find favorable setups.

I touch upon this and much more in this week’s Options Jam Session: [Read more…]

[Options Premium] Fueling Up for a Long Drive

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The energy sector is looking poised to break into uncharted territory, and we too are going to break some new ground by doing an options trade we’ve never done before in ASO.

Calling it a “trade” might even feel a little off, considering the timeframe of this one. It might be more accurate to call it an investment. Compared to most trades we do, this one has the potential to certainly feel like one. [Read more…]

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