WARNING SIGN

Keep an eye on this chart today, as it and the XLP are the first sectors to hit new highs/reach prior highs. When defensive sectors lead, it becomes a concern for the underlying trend.

We’ve looked at former market corrections and when these sectors reached new highs into volatile market conditions, market weakness has followed.

XLU1yr

clipimg51

 

BABA-BEAUTIFUL

We’ve talked about this on a few occasions, but BABA bears a striking resemblance to TWTR a few weeks after its IPO. Take a look:

bababitch

twtripo

This remains one of my favorite ideas in the market right now. Shout out to Dan Loeb for the support.

OA

OA Buy: TRUE

I wanted this at $19, bought Nov 20 calls for a pop.

More later,

OA

PRICING PREDICAMENT

The volatility indices have worked off their explosive moves from last week, but still remain at levels equivalent to their former 2yr highs. In environments like this, it typically means that premium is an expensive bet. Mix in the fact that earnings season is upon us and this makes premium for most individual stocks elevated as well.

I often say that in situations like this “less is more.” When option premiums are blown out like this, it makes buying options a lower probability bet. Once the volatility normalizes we start to creep back in, but in these situations I take less trades for that 1-2 week period of volatility normalization because it weighs heavily on premium you trade.

We’ve been talking about utilizing stocks that are slower moving instruments than we normally like. These low beta instruments will have cheaper premiums than what we normally trade, but will likely be expensive relative to themselves.

If the market continues to consolidate here, this may only last another week or so. In the meantime, if you are trading options, do so with shorter timeframes and purchase shorter dated options. Ideally, you could sell spreads here as a high probability alternative, or utilize short puts to enter stock positions or sell calls to protect the stocks you own.

In regards to the day, the Russell has the relative strength card again, but is at the 1090 wall. A break of this would be pretty constructive in the short term.

More later,

OA

1090 HOLDS

Our map for the week is looking ok thus far. 1090 was the action point.

If you bet against some stocks, or the market itself, you’ve got some good traction for lower prices early next week. Whether or not we get a buyer there is yet to be seen.

Once we see a little downside, I’ll post a few favorite longs to engage the market from both sides – short term time frames.

After Hours with Option Addict members, I have uploaded a video of my market opinion for the day. I need to head out to help a family member in need and won’t be there to interact this afternoon. The video goes over revised strategy and ideas for the next 2-4 days.

OA

DIVERGENT

1090 is still the level to watch. On a day where markets are ripping, the divergence in small caps wages on.

divergent

WARNING SIGN

Keep an eye on this chart today, as it and the XLP are the first sectors to hit new highs/reach prior highs. When defensive sectors lead, it becomes a concern for the underlying trend.

We’ve looked at former market corrections and when these sectors reached new highs into volatile market conditions, market weakness has followed.

XLU1yr

clipimg51

 

BABA-BEAUTIFUL

We’ve talked about this on a few occasions, but BABA bears a striking resemblance to TWTR a few weeks after its IPO. Take a look:

bababitch

twtripo

This remains one of my favorite ideas in the market right now. Shout out to Dan Loeb for the support.

OA

OA Buy: TRUE

I wanted this at $19, bought Nov 20 calls for a pop.

More later,

OA

PRICING PREDICAMENT

The volatility indices have worked off their explosive moves from last week, but still remain at levels equivalent to their former 2yr highs. In environments like this, it typically means that premium is an expensive bet. Mix in the fact that earnings season is upon us and this makes premium for most individual stocks elevated as well.

I often say that in situations like this “less is more.” When option premiums are blown out like this, it makes buying options a lower probability bet. Once the volatility normalizes we start to creep back in, but in these situations I take less trades for that 1-2 week period of volatility normalization because it weighs heavily on premium you trade.

We’ve been talking about utilizing stocks that are slower moving instruments than we normally like. These low beta instruments will have cheaper premiums than what we normally trade, but will likely be expensive relative to themselves.

If the market continues to consolidate here, this may only last another week or so. In the meantime, if you are trading options, do so with shorter timeframes and purchase shorter dated options. Ideally, you could sell spreads here as a high probability alternative, or utilize short puts to enter stock positions or sell calls to protect the stocks you own.

In regards to the day, the Russell has the relative strength card again, but is at the 1090 wall. A break of this would be pretty constructive in the short term.

More later,

OA

1090 HOLDS

Our map for the week is looking ok thus far. 1090 was the action point.

If you bet against some stocks, or the market itself, you’ve got some good traction for lower prices early next week. Whether or not we get a buyer there is yet to be seen.

Once we see a little downside, I’ll post a few favorite longs to engage the market from both sides – short term time frames.

After Hours with Option Addict members, I have uploaded a video of my market opinion for the day. I need to head out to help a family member in need and won’t be there to interact this afternoon. The video goes over revised strategy and ideas for the next 2-4 days.

OA

DIVERGENT

1090 is still the level to watch. On a day where markets are ripping, the divergence in small caps wages on.

divergent