Hey Traders,

Happy Thursday!

Yesterday, I pointed out that the at the money straddle for the S&P 500 was way too cheap given the risk.

Turns out I was right!

I also pointed out that I thought options on earnings were too cheap. Turned out to be true for GOOGL and AMD.

The FOMC was not nearly as dovish as the street was looking for – again, something we have been pounding the table on here at Option Pit.

So what’s next?

We have 3 more huge earnings tonight. We also have XOM and CVX Friday morning to go along with Non-farm payrolls.

The at the money straddle for Friday is about 46 dollars:

Say it with me folks … THIS IS TOO CHEAP!

Even with the VIX getting a lift over 14, 0DTE and 1DTE options are getting POUNDED.

This is crushing the front end of the volatility curve and creating great trading opportunities.

Recall I mentioned on Wednesday that the price action on Wednesday would create a great 0DTE trade.

How does 187% and 390% or more sound?  That is what we created on Wednesday…good news we are doing another month of 0DTE trading in February…. you can click right here to join Licia and myself…. Or you can call us 888 872 3301.

Here are the most interesting trades from Wednesday:

Meta Platforms Inc (Ticker: META): Ahead of earnings, a trader that was long the META Feb 335 calls sold to close, and rolled up to the 370s. They also levered up slightly, but did take money off the table. This is a win-win for the trader on this stock replacement play. If the stock goes up the trader has more options; if the stock drops, they have put a lot of money in their pocket.

Qualcomm Inc (Ticker: QCOM): Here’s a big put sale in QCOM ahead of its earnings. The trader sold 10k of the July 125 puts. I continue to think this is going to be one of THE winners for 2024. This is probably my favorite stock, as I think it’s going to 180-200.

Valley National Bancorp (Ticker: VLY): NYCB reported TERRIBLE earnings and took it on the chin. VLY, a similar bank, was down as well on Wednesday. This trader is worried it could drop huge, buying the Oct 9 puts for 1.60 and lifting the offer on a really wide market.

Advanced Micro Devices, Inc. (Ticker: AMD): A trader sold 1700 of the Feb16 150 calls in AMD at a pretty nice profit and then used ALL of the credit to buy 5570 of the AMD Feb16 170 calls. Given the drop AMD had, this is an aggressive play on a snap back rally. The trade has two weeks to move back to new ATHs.

American Airlines Group Inc (Ticker: AAL): Tied to stock, a huge number of puts and put spreads went up, with the trader going long the Aug 10 and May 10-9 put spread tied up. These are likely set up as hedges and typically don’t come to fruition, but it’s worth noting that the bond owners (the likely traders here) are getting nervous again.

Position updates:

VIAV: Reports after the bell on Thursday.

AVTR: Big put sale on Wednesday in this one, I like the play.

DOW: This is a close.

KDP: Flat.

BP: We will look to kill the balance up over 100%.

ETRN: Down small.

USFD: Trade is flat.

SB: Might be getting ready to squeeze.

SHEL: Reports on Thursday.

IOVA: Big rally on Monday, let’s see if this gets some momo here.

Your Only Option,

Mark Sebastian