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So did EV stocks on the back of Tesla Inc.’s (Ticker: TSLA) big jump in sales.
These are trade Frank and I recently closed in Capitol Gains but will be adding more for a longer duration today.
But is the run over? Methinks not.
Run with us …
Implied Volatility Is Too Cheap in the Oil Space
This is a theme our members will find in all Option Pit products: When we buy calls or puts, we look for cheap implied volatility.
Cheap options grow to expensive options faster than if they start off very expensive IV-wise.
This is what is known as a high-gamma option where we want the change in delta of the option to be very fast. (Recall that delta is the option’s sensitivity to a $1 change in price of the underlying.)
We want acceleration in option prices and that leads to quicker exits.
SPDR S&P Oil and Gas Explorers ETF (Ticker: XOP) six-month chart with IV on the bottom.
Note above how Vol Man is surfing the IV lower in XOP with a near vertical lift in the stock price.
For now, XOP is flying under the radar and options are relatively cheap.I expect XOP to test the recent highs around $112 again – and buying cheap calls will be a good way to do it.
Like Ford Motor Corp (Ticker: F), stocks are running way faster than the options are priced
Trade Update
For those watching, I closed my Walgreens Boots Alliance Inc (WBA) strangles on the quick rally Tuesday morning for a 20% return.
The Rundown
Option Shopper
Licia Leslie puts on her best trading shoes to find option bargains using market making and charting experience. Generally debit options and spreads with low risk, high reward setups. Short hold times are the norm.
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- Licia currently likes United States Natural Gas Fun (Ticker: UNG) and is still looking for a bounce.
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Capitol Gains
Wall Street insider Frank Gregory and I run a portfolio approach to trading options with stocks that have good long-term prospects based on Frank’s K Street knowledge and my options expertise.
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- I closed Ford call spreads for a 72% gain and Exxon Mobile Inc (Ticker: XOM) calls for 40% gain.
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Other stocks currently in the CAPITOL GAINS portfolio:
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- Mandiant Inc. (Ticker: MNDT) long cybersecurity
- SPDR Oil and Gas Explorers (Ticker: XOP) long oil
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Power Income Trader:
Power Income Trader is a systematic approach to trading inflation. By pulling real-time data from the Fed, US Treasury and Gov’t, Power Income Trader alerts users on changes in money flow driven by Fed policy. Bill’s system puts you out in front of the most powerful money flow in the world.
Bill is currently rolling some put spreads in the iShares iBoxx $ High Yield Corporate Bond ETF (Ticker: HYG) to February to buy a bit more time as bonds start to drop.
Big Money Flow
Each week, Option Pit CEO Mark Sebastian looks at size institutional option buying with a twist. He mostly buys calls or puts to ride the large momentum trades.
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- BMF liked some Pfizer Inc. (Ticker: PFE) puts as and they liked us to the tune of near 80% gain so far.
- Kraft Heinz Foods (Ticker: KHC) ran to a close and 49% gain.
- Ford (Ticker: F) calls rang the bell for a 59% gain.
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A big day for Big Money Flow!
Robinhood Trader:
Option Pit CEO Mark Sebastian uses the Robinhood Gamma Radar to find order flow in active MEME names.
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- Mark added some FuelCell Inc (Ticker: FCEL) calls to the mix and FCEL is popping a bit this week.
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Pro Trading Room:
The Pro Room is Option Pit’s live access to Mark and myself during trading hours. Our Pro students post trade ideas with Mark and me during the entire trading session.
The Pro Room was selling puts and put spreads on the slowdown into the holiday week. SoFi Technologies Inc. (Ticker: SOFI) popped up on the volume ticker from one of our Pros.
Elsewhere, some F bullishness:
Pro Member Cat jumped into a pre-earnings diagonal spread trade:
And little profit taking:
Volatility Edge & Volatility Trading Club:
Volatility Edge is run by Mark and uses the proprietary Option Pit VIX Light indicator to guide volatility trading. The Vol Trade Club is run by me (AG), and employs a long strangle strategy that seeks to use Cboe Volatility Index (VIX) future decay to pay for upside iPath Series B S&P 500 short-term VIX futures ETN (VXX) and Pro Shares Trust Ultra VIX Short Term Futures ETF (UVXY) options.
The Option Pit VIX Light Is Red … and we got a tepid rally only to be pushed back up .31 VIX on the day.
Mark closed half of his VIX EDGE Jan. 19 19-strike puts at 1.60 today for an 80% return so far.
Remember, a lot of vol strategies I use are market neutral. That means whether SPX or VIX go up or down, the positions still make money. This is a technique you can learn in the Volatility Trading Club and Volatility Edge!
FINALLY, DON’T FORGET TO REGISTER FOR TRADEFEST ON JAN. 13!
To Your Trading Success,
AG