Update – November 8th, 2017
Closing out the call spread for profits.
Update – November 20th, 2017
Taking profits on the put spread.
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By Steven Place
By Steven Place
Markets are still in rally mode, although with the most recent push it made sense for a correction.
And just like the rest of the year, the correction has come over time rather than price. Sideways action that’s rotational.
On top of that, we’ve got earnings season, so expect individual stocks to continue to diverge.
Here’s the thing… and let’s be straight up here.
The lack of volatility in the broad indexes doesn’t feel natural. We’re seeing all time lows on the VIX, and the tightest trading ranges of all time. I’ve got some theories as to why this is happening, but just because we’ve seen tight ranges doesn’t mean we must expect a market crash next week.
We’ll continue to look for good risk/reward in individual stocks, pick our spots, and place the trades.
SHOP got hit hard… not on earnings, but on a report from Citron, a noted short seller.
This feels like more of a technical breakdown and stop run… any bad news into earnings will most likely get priced in.
Trade Setup
Expected Price: 93
Sell to Open SHOP Nov 80/75 Put Spread
Tier 1: Enter at 0.90, Close at 0.20
Tier 2: Enter at 1.10, Close at 0.40
NO TIER 3 – Will wait post earnings if we need to roll anything.
Citigroup is fading hard after earnings. Look for the second extension to the downside to sell spreads into it. I’m watching previous resistance and a rising 50 day moving average at 70/share.
Trade Setup
Expected Price: 70
Sell to Open C Dec 65/62.50 Put Spread
Tier 1: Enter at 0.34, Exit at 0.10
Tier 2: Enter at 0.50, Exit at 0.34
Tier 3: Enter at 0.65, Exit at 0.50
By Steven Place
By Steven Place
By Steven Place
Technical difficulties on the live video, I’ve put down all trade thoughts into this video:
By Steven Place
Markets are running short term overbought right here… but I’m not sure that matters too much.
The past 2 weeks have been a relentless bid up in stocks. This is institutional money, and it is price-insensitive. The “why” behind it doesn’t matter that much, but my thoughts here is that the market is attempting to price in earnings before they happen.
So if we’re overbought, we should expect a correction, right? Possibly, but remmber we can correct through time– markets can go sideways while there is rotation underneath the surface. Trust me, I’d love a pickup in volatility and deeper pullbacks but we just haven’t seen it this year.
Earnings season is coming up — make sure you have the dates on your calendar and avoid adding on full size into an event.
Smallcap stocks have seen a massive run and are due for a pullback. I’m looking for a move into the 20 day moving average, which will be just above 1480 in the next few days.
Trade Setup
Expected Price: 1480
Sell to Open RUT Nov 1400/1390 Put Spread (10 wide spread)
Tier 1: Enter at 1.10, Exit at 0.20
Tier 2: Enter at 1.60, Exit at 0.60
Tier 3: Enter at 2.10, Exit at 1.60
We may have already missed this one, but let’s put it out there just in case.
For a little context, WYNN is a casino that has operations in Macau. China continues to make up for a large amount of earnings growth, so those Macau numbers are closely watched.
There’s a holiday season for China and so investors are watching tourism numbers into Macau for this “golden week.” So far they appear light, which is the current short term catalyst for the stock.
Right now it sold off hard into the 50 day moving average and bounced, but if it sees weakness again then it will crack that level and head back into the range from the last few months. Playing that range will be a good bet so sell put spreads into that level.
Trade Setup
Expected Price: 140
Sell to Open WYNN Nov 125/120 Put Spread
Tier 1: Enter at 0.65, Exit at 0.15
Tier 2: Enter at 0.95, Exit at 0.40
No Tier 3 Until After Earnings