Markets are finally seeing some weakness and higher volatility.
The financial journalists are having a hard time pinning down the reason behind it. And sometimes that's OK... it's barely a blip. They're blaming risk out of Spain and Catalonian independence, but my feel here is that is has to do with light iPhone sales. A gap down in AAPL means a gap down for the markets, and short term traders simply start rebalancing.
It's still just a blip. I'd love more vol to come back, but we're simply not seeing it. A loss of 2540 would tell me that we're due for a pickup in volatility and more two-=way action, but we simply haven't seen that yet.
Trade #1: NFLX
NFLX came out with earnings and had disappointing price action. Think about the psychology here. If you're an investor sitting on nice gains and see that price action after earnings, you're definitely thinking about taking profits here. You get enough people thinking like that and you may get a nice little cascade lower.
I'm looking for a pull into the rising 50 day moving average, right at 185.
Trade Setup
Expected Price: 185
Sell to Open NFLX Dec 165/160 Put Spread
Tier 1: Enter at 0.70, Close at 0.20
Tier 2: Enter at 1.00, Close at 0.50
Hold off on Tier 3 in case we have to roll down.
Trade #2: UNP
UNP is selling off right before earnings. I think downside risk is priced in here, so selling smaller size spreads is a good place to start a trade.
Trade Setup
Expected Price: 111
Sell to Open UNP Dec 105/100 Put Spread
Tier 1: Enter at 0.77, Exit at 0.27
No Tier 2 or 3 until after earnings