Is the Covid Vol Storm Over?

Hello Pit Crazies,

Gloom and doom surrounds us on social media =(.

Lockdowns, Delta variant, cancelled Olympics, funky vaccines, etc., etc.

The news stream is endless, yet the S&P 500 (Ticker: SPX) and Nasdaq are touching the sky …

But VIX is not anywhere near all-time lows.  

Still, there are pockets of cheap options not seen since the pre-pandemic.

And they could very well be the trade of the year.

We’ll discuss inside today — and they’ll also be a topic tomorrow when Mark, Griff and I go live tomorrow at 11:30 a.m.

Opportunity Knocks

Mark made some nice hay under the currently-on-hiatus Warren MARK-et banner last year, selling out-of-the-money puts for big, juicy premiums.

Those premiums are a lot smaller now.

Why? 

Because longer-term volatility expectations are way down.

I am seeing single-name volatility at pre-pandemic levels for the first time since, well, pre-pandemic.  

Long-term volatility, the prices market makers are willing to sell 6-month options, is at its lowest level in a year.

This is a real chance to buy longer-term options in name stocks like FireEye (Ticker: FEYE)

1-year volatility in FEYE with the orange line 180 day implied volatility

Implied volatility is cheap enough that Jan. 2022 options are enticing for me to purchase.

I can buy FEYE Jan. 2022 25-strike calls and 15-strike puts for $1.65. That is a very cheap price for a stock that has been above $25 and well below $15 in the last four months.

There are a lot of stocks like this and, while the meme names get all the attention, that does not mean other stocks can’t move, as well.

Want to know more? Check out the Mentor Trio webinar with Mark, Griff and I tomorrow at 11:30 a.m.!

The Lesson: When vol goes low, longer duration trades are usually best.

The Rundown

Power Moves Portfolio 

It’s Wednesday and that means a Power Moves Portfolio update!

The live trade log is here

Frank went back to Cyber Security in a big way this week. 

The idea I’m pricing is this:

I like Palantir (Ticker: PLTR) as a long-term long, but the stock is very “range bound,” so I will use a diagonal call spread to generate some income dollars before earnings. 

I have found trading this name that waiting for pullbacks is the best play and PLTR is $5 off of recent highs. 

I will buy four PLTR Jul23/Aug06 diagonal call spreads for $1.50 or better.


PLTR price and volatility chart

Frank identified a number of intriguing cybersecurity names this week and Ping Identity Holding (Ticker: PING) looks like a good candidate for cheap options. If the PLTR pays, I most likely will roll into PING.

      • We own net calls in BWX Technologies (BWXT), General Electric (Ticker: GE), Taiwan Semiconductor (Ticker: TSM)
      • I added two Coinbase (Ticker: COIN) Aug. 20 250/270/290 call butterflies for $2.55. I’m spending the COIN call spread money and to see if COIN can make a move back to the $270 level.
      • I own BWX Technologies (Ticker: BWXT) July 15 16-strike calls and they are toast.  This name is intriguing because of the nuclear nature of its tech. Looking for a decent put sale here.
      • We have five legacy Cleveland-Cliffs (Ticker: CLF) July 16 15-strike puts.
      • GE is a play on green energy.  We own two GE Sept. 17 14-strike calls for a credit. 
      • We bought two TSM July 16 125-strike calls for $2.51. TSM is at a recent high and since we have some money in the kitty, I am riding these calls back up.

To Your Trading Success,

AG

 

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