Yo Pit Crazies,
Is that damn COVID coming back?
I hate that thing.
Now they are telling us there is a Delta variant.
It sounds like Monster 0 in a Godzilla movie — a monster so bad that it made Godzilla a good monster.
COVID is still annoying, but we have vaccines now.
And, since you’re here, there has to be a trade for it.
Plus it’s called the “Delta” variant, so I can’t resist …
I will do a trade that is a variant on delta — and will kick COVID’s butt.
You must read on!
And you must also catch Bill Griffo today at 1 p.m. since I will be a co-host. (Shameless self promotion!)
He’ll unveil the first of his five macro picks in July — but the event is only open to Volatility Edge members.
The chart below is of Regeneron Pharmaceuticals (Ticker: REGN), famous for providing President Trump with his COVID therapy.
6 month chart of REGN price and volatility, notice long term IV is relatively low (brown line).
Now, as a $550 stock it is not cheap, so I grabbed Edge Hunter to show me the cheapest setup with performance on a 30-day hold.
To perform my variant delta trade, I want to be long COVID therapy stocks …
REGN is one and Pfizer (Ticker: PFE) is another. PFE moving 10% is tough, but REGN moving 10% is within the realm of possibility.
My variant delta is long calls in REGN, short put spreads in PFE.
Together those stocks win as they crush the COVID monster.
Note that I had to go out to Jan. 2020 to find it: one REGN Jan. 2022 720-strike call for $8.95.
Normally I don’t buy calls for $175 out of the money, but six months is a long time and REGN is a cash generating machine with a one-year high of $660.
To create my variant delta I need to find a way to pay for the out-of-the-money call I just bought, so I am using short PFE put spreads.
To do that, I sold PFE July 23 38.5-/35-strike put spreads 10x for every one REGN call I bought.
If I take the stock for the divy, I will have the REGN paid for, and I intend to keep selling PFE put spreads and stay long this COVID monster.
Let’s see how it goes.
(By the way, I set up the PFE put sale in yesterday’s Pro Class on dividend capture. I need to show my students it can work!)
Power Moves Portfolio w/ Frank Gregory
Option Pit DC and 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.
The live trade log is here, and I’ll have a full recap for you every Wednesday.
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.
- Lots of call spread buying in Advance Micro Devices (Ticker: AMD) into the earnings report.
- Buying some airlines calls — Delta Air Lines (Ticker: DAL) July 23 44-strike calls
- QuantumScape Corp. (Ticker: QS) is on deck still!
Option Pit CEO Mark Sebastian uses the Robinhood Gamma Radar to find order flow in active names.
- Mark is riding a ProShares Trust Ultra VIX Short Term Futures (Ticker: UVXY) July 02 27-strike put.
- He has long call trades in Ford (Ticker: F), ExxonMobil (Ticker: XOM).
Each week, Option Pit CEO Mark Sebastian looks for low-volatility, mid-term duration call buying and put buying opportunities.
- Licia and I closed 80% of the Walmart (Ticker: WMT) July 23 39-strike calls for a 169% gain yesterday.
The Trading Legion is an intermediate-level education and a long strangle trading vehicle. The goal is to teach students the best times to buy options.
- Taiwan Semiconductor Inc. (TSM) was a new add today and one I double-dutied into the Power Moves Portfolio. I am looking for a run into earnings toward the end of the month.
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 VIX future decay to pay for upside VIX, VXX and UVXY options.
The Option Pit VIX Light is still red, and the VIX is hovering just under 16 looking for the 4th of July VIX mark down.
This is still near the lows for VIX in the COVID era, so any move lower would be a good time to close vol puts.
At this point, drops in VIX will likely come slower as it gets to the bottom of Zone 2 (13-18). I think the Aug. VIX cycle is very enticing, with Aug. 18 17-strike puts only $1.15 That stangle could go into the VTC Monday.
For Volatility Edge …
Mark is lighter short UVXY now and rolled into trade No. 100 UVXY July 02 27-strike puts for $.95.
For Volatility Trading Club:
- I added Trade No. 251 — long SPY July 09 420/412/404 put butterflies and VXX July 09 29.5-strike puts.
- I closed some puts, selling the VXX July 02 28.5-strikes for $.12 — or better than 100% on credit.
- 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!
To Your Trading Success,