How do you decide what to trade? The way you want to trade it. How long do you want to stay in it?
How do you decide what to trade? The way you want to trade it? How long do you want to stay in it?
I like to think of the potential and best way to achieve it.
That means I need to evaluate what I want to trade and then form an opinion.
To trade options I need to have a solid opinion, then I make a decision … and form a trade based on the edge I see.
Making Power Moves
In the Power Moves Portfolio, Frank Gregory has an idea — and I have an opinion.
Frank brough forward BWX Technologies (Ticker: BWXT) , which is a steady player in the nuclear game.
So far, Frank’s nose has been pretty good — OK, better than pretty good — so I agree with the Nuclear play idea.
Lithium is one side of the ledger for batteries, but the big power will end up being nuclear generated.
Daily Stats for BWXT. Note the VERY low volume
BWXT does not trade very much, with just 70 calls traded Friday …
That means the market does not know that it exists. In and of itself, that is not a bad thing.
The volume is super low and the chart below also says it is a pretty range-bound name:
BXWT 2-year stock chart. Note the low implied volatility
After looking at the chart I see a low volatility stock with a plateau above $70.
The only real option trade here is to buy and in-the-money … call on a pullback and wait for a pop back up or just decide on an ownership level and sell a put spread.
With the options not calling me, I would need a more advantageous — read: lower — stock price to enter.
I am setting up targets so I would sell the BWXT July 16 50-/55-strike put spread at $1.
BWXT has to drop first — there is no way around it. If I fill, I will post the trade. The BWXT July 16 65-strike calls for a $1 might work … but it will be a miracle fill.
THE LESSON: To make an option trade, something has to be in your favor. A lower underlying price is not a bad place to start, so put in lower call bids and higher put spread offers and see what fills. Just be ready to like what fills!
That’s right — Mark, Licia and myself are all on one page.
Black and white. P and L.
If you are interested in seeing the trades we have on and what they look like, this is a nice place to find them.
To Your Trading Success,