The march continues. After some Fed news that spooked the markets a bit, stocks recovered and finished near their highs.
Look, every market situation is going to be unique, as competing narratives and capital flows will be different every time.
Yet this market is acting weird. The VIX is incredibly elevated relative to the actual volatility in the market. AAPL is hilariously overweighting tech stocks, along with MSFT, GOOGL, FB and AMZN.
Those 5 stocks make up 50% of the weighting in the Nasdaq. Very top heavy, and if you see one rug pull, it could go into the rest of the market.
And we saw a little bit of that today. AAPL took a hit, the market got soft, but there is just SO MUCH LIQUIDITY relative to the available assets to invest in.
Big water, small hose.
My focus still is going to be on names that have seen momentum, as they tend to carry that momentum long enough to get us some profits on the trades.
Trade #1: CRM
Simple setup here– it’s a massive earnings breakout on good news, and odds are the stock is going to continue higher. We’re going to be a little more aggressive, which decreases our odds of success yet increases the potential profit.
Expected Price: 275.08
Sell to Open CRM 18Sep20 255/250 Put Spread
Tier 1: Enter at 0.7, Exit at 0.04
Tier 2: Enter at 0.98, Exit at 0.17
Tier 3: Enter at 1.26, Exit at 0.21
Stop Out If Close Under 254.89
Trade #2: TLT
Rates are seeing a good move higher, which leads to a selloff in TLT. I’m looking for the lows from this summer to come into play and will “catch the knife” into those levels.
Note: the duration here is different than the other setups because TLT has lower premium available in Sep options.
Expected Price: 158.66
Sell to Open TLT 16Oct20 150/145 Put Spread
Tier 1: Enter at 0.65, Exit at 0.09
Tier 2: Enter at 0.91, Exit at 0.09
Tier 3: Enter at 1.17, Exit at 0.09
Stop Out If Close Under 149.89
Trade #3: MSFT
MSFT has seen a clear technical breakout, and I want to be involved on any retracements back to that level.
Expected Price: 221.88
Sell to Open MSFT 18Sep20 202.5/200 Put Spread
Tier 1: Enter at 0.39, Exit at 0.03
Tier 2: Enter at 0.546, Exit at 0.146
Tier 3: Enter at 0.702, Exit at 0.192
Stop Out If Close Under 202.39