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.
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.
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.
The Lesson: When vol goes low, longer duration trades are usually best.
Power Moves Portfolio
It’s Wednesday and that means a Power Moves Portfolio update!
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,