Archives for February 2021
CAT Bear Call Spreads
This showed up on my screener today.
First, a look at the daily chart:
CAT has been running on the “global growth” theme that has been prevalent from the past few months. Lumber futures crack 1000, copper futures above 4, and CAT is definitely a proxy for those kinds of moves.
Let’s zoom out to a weekly chart, with some Bollinger bands.
The stock is sitting with 2 weeks in a row above the WEEKLY Bollinger band. This is not something that happens very often… but over the past 12 months it sounds about right. That’s just the kind of market we’ve been in– panicked buy-ins as the US stimulus news starts to get priced in.
We have seen the stock run above it’s upper weekly BB before, but not with the kind of range expansion we’re currently seeing.
Here’s a look at the stock against its 50 week moving average:
Stock is up 50% from its 50 week moving average. Last time this happened was the massive move in late 2017, which is where a ton of other assets were running.
Also, if you wanted to compare the move from that rally, here’s what it looks like:
We are well past the energy we saw from the most recent parabolic move. Granted the end of the world was happening in March 2020 so we can be a little forgiving in that respect, yet I think we’re at a good sell area.
Here’s the trade setup:
Pretty straightforward bet– we expect the further upside to be overpriced in the options market.
Because this market is so strong, we will scale in, adding to the trade if CAT has one more push. And if the stock holds above 240.11, then I’m going to take the loss and move on.
Hangover Trade in MARA
MARA is being taken to the woodshed with many other momentum stocks today. This is a crypto proxy play, so this plus RIOT and SOS and MVIS are all getting taken out.
With this move, investor fears are (justifiably) elevated, and implied are still running hot at around 200%. I think that this is a fade.
The technicals still look “fine.” Odds are the stock won’t see a gap fill to 40 anytime soon, and will just chop investors up to death.
Which is good— that’s what we want, we want to see bounces and selloffs and chop, all while our trade setup decays and we pull out a nice profit.
The Setup
Pretty straightforward idea here, we are selling puts that have a nice cushion to the downside and offer some solid risk premium. I think today’s nasty selloff may see a few more days of downside, so it’s possible I’m early on this trade.
That’s why I want to scale in– I will add to this trade if MARA comes into the gap from Feb 5th– that’s in the mid 22’s, and I’ll look for just a bit more of an overshoot to the downside to add.
If things get nasty, then I can always roll the put sales down and out to April options.
If you want to keep your margin requirements down, then look at buying the 15 put against, making the trade a March 18/15 bull put spread.
Full Time Profits, February 22nd, 2021 – TAN, IBB, PYPL
We’re starting to see signs of a rotational rug pull.
Sure, financials and energy stocks look good… but many pockets of momentum are getting hit. Hard.
I’m not talking about AAPL or other mega-cap tech stocks. Some of the darlings in the momentum space are seeing heavy liquidations. Solar stocks have seen 20% corrections already, and biotech has been hit as well.
I want to start scaling into long positioning in some of these areas as they offer the best risk/reward on just a little bit more of a dip.
Trade #1: TAN
This is a solar ETF that got nailed today. It’s tradign back to support and a rising trendline will come up to price here soon. I want to be involved on any further weakness this week.
Trade Setup
Expected Price: 99.01
Sell to Open TAN 19Mar21 90/85 Put Spread
Tier 1: Enter at 1.32, Exit at 0.69
Tier 2: Enter at 1.848, Exit at 1.2
Tier 3: Enter at 2.376, Exit at 1.63
Stop Out If Close Under 89.89
Trade #2: IBB
Similar structure in biotech – IBB. Looking for the pull into the 50 day moving average, and previous price support. I don’t think that this will go straight down, but establish some boring trading range like we saw in the second half of 2020.
Trade Setup
Expected Price: 160.54
Sell to Open IBB 19Mar21 153/150 Put Spread
Tier 1: Enter at 0.59, Exit at 0.18
Tier 2: Enter at 0.826, Exit at 0.38
Tier 3: Enter at 1.062, Exit at 0.51
Stop Out If Close Under 152.89
Trade #3: PYPL
This is a “first pull” setup I’ve been waiting on. The stock had good earnings and a gap higher, and the pull into that gap is where I want to start getting bullish.
Trade Setup
Expected Price: 269.14
Sell to Open PYPL 19Mar21 250/240 Put Spread
Tier 1: Enter at 1.95, Exit at 0.58
Tier 2: Enter at 2.73, Exit at 1.27
Tier 3: Enter at 3.51, Exit at 1.69
Stop Out If Close Under 249.89
Market Primer Video
Market Primer, Feb 21st
Short Retracements
JMIA
Short opps into 59-60, then 61 previous support, then 65.
Option Strategy
April 65/50 Put Spread Buys
EXPI
Any retrace into high 70s and start looking for a rollover.
Option Strategy
March 70/55 Bear Put Spread
NVAX
Look for push into 300.
Option Strategy
April 240/200 Bear Put Spread
YY
Nasty liquidity break on Friday. Look for retrace into 135 for entries.
Option Strategy
March 125/120 Bear Put Spread
Hangover Trades
Should get a sell the news event as CCIV finally signs the deal with Lucid. Into the low 40s I want to sell some puts.
Right now CCIV March 30 puts going for 4 bucks, that’s a pretty good premium to work with.
CLOV
The stock is a dog but I expect the floor at $10 to hang around for a bit.
Option Strategy
March 10 Put sale with intent to roll to April looks good.
AMC
Look for the floor on the stock to get taken out, then start layering into some bullish exposure. Can easily see another pop if/when things unlock.
Option Strategy
Long Jun 8 Call
Sell 2x Jun 4 Puts
Capture a credit.
SOL
Stock has already been crushed a good amount, I know this because I had long calls on the 25 breakout (doh!). Right now, the March 12.5 put sales look juicy with intent to scale in.
Momentum Trades
CCL
Lotta open space here if it gets going. We’ll probably see a few false starts, so sell into breakouts and rebuy into the “failed breakout” pattern.
Option Strategies
Aggressive: March 35 Calls Lotto
Still Aggressive but not as much: April 30/40 bull call spread
SPI
EV play, been consolidating since it’s parabolic run to $45. This will probably chop everyone up to death, then when all the spec options expire in March, it’ll start to run.
Option Strategy
Aggressive: April 20 Call Lottos
Conservative: April 15/20 bull call spread with April 7.5 Put sale
F
Ford, of all things, looks like it’s about to go parabolic, looking for some absurd push to $15.
Option Strategies
Aggressive: April 15 Calls
Conservative: April 12/15 call spread buys, financed with April 10 put sales
SPACtion
BTWN
Stock starting to clear, looking for push to 20+
GIK
Scale into dips, looking for a push to $20. EV play.
NSH
This is a pre-DA SPAC. It’s run by a bunch of spooks — CIA, DNI, and so on. They’ll probably bring something like a PLTR/SNOW onto the market. I’m in, and will add on dips, then sell some into any whisper of a DA target.
Income Trades
SMH
March/April 320 put calendar if SMH runs to 260
SPX
April Unbalanced Iron Condor
Selling 2x 3490/3500 Put Spread
Selling 1x 4100/4110 Call Spread
Credit: 4.00
Roll and add to call spread if/when SPX rips
Aggressively take profits on the call spread into dips then resell into rips.
XLE
March/April 45 put calendar into any push into 48
BIDU
March 410/420 bear call spread if the stock pushes to 356-360 early in the week.
Bull Put Spreads
Watching:
- QQQ
- IBB
- TSLA
- FSLR
- GOOGL
- PYPL
Into any extended Nasdaq weakness this week. Short option starts with 20 delta, looking at 3-5 wide spreads.