This week it seems that large cap tech is taking the reigns of the market rally. FB, GOOGL, AAPL, AMZN… all monster moves, some of which is driven by option related voodoo (short gamma on upper call strikes).
It’s hard for the market to selloff when the demand for hedging is still incredibly high. From the recent pullback in to 4375, we saw the VIX jam into 23. If (and that’s a big if) that volatility finally comes in, then we can make the case for a stronger market drawdown.
For now, we can use the low inter-market correlations to our advantage.
Trade #1: CVNA
Carvana had a great rally over the past few months, and this is the first decent pullback we’ve seen. The options market is not terribly liquid, so consider dropping size a bit or more aggressively scaling out.
Expected Price: 328.06
Sell to Open CVNA 15Oct21 300/290 Put Spread
Tier 1: Enter at 2.27, Exit at 0.95
Tier 2: Enter at 3.178, Exit at 1.8
Tier 3: Enter at 4.086, Exit at 2.42
Stop Out If Close Under 299.89
Trade #2: GOOGL
This is a tricky one, I think we can start looking for a fade in GOOGL, but must respect the overall trend. I want to see it go parabolic first, and will be using the upper edge of the turning point indicator to dictate what strikes to select.
Expected Price: 2981
Sell to Open GOOGL 17Sep21 3020/3030 Call Spread
Tier 1: Enter at 2.75, Exit at 1.51
Tier 2: Enter at 3.85, Exit at 2.62
Tier 3: Enter at 4.95, Exit at 3.53
Stop Out If Close Over 3020.11
Trade #3: DIS
Looking for a breakout here, and will anchor against the recent swing lows at 170. There’s the possibility that the stock knocks out a range a bit more, and we can use our scaling protocol to our advantage here.
Expected Price: 181.3
Sell to Open DIS 15Oct21 170/165 Put Spread
Tier 1: Enter at 0.75, Exit at 0.02
Tier 2: Enter at 1.05, Exit at 0.26
Tier 3: Enter at 1.35, Exit at 0.32
Stop Out If Close Under 169.89