The Options Explosion May Take a Few Prisoners

Like a kid with a new toy at Christmas, it appears retail is having a fantastic time playing with options. 

 

There are reports of insane numbers being put up, including …

 

      • Single stock options trading beat actual underlying shares by 1.4 to 1
      • 70% of all option trading is expires within 2 weeks
      • Thursday was the highest stock option notional traded of all time ($904bn)

Finally, there were about 8 million options traded on Tesla last week and over 100 million call options traded on all stocks.

 

Heading into the Fed taper with uncertainty if Jerome Powell will be reappointed as chair presents enough uncertainty alone to make a bet on the short-side for stocks in the near-term.

 

Today I’ll show other supporting evidence and give you a trade I am looking at for the next 2 weeks. 

 

***

And don’t forget to register for my live session Tuesday at 8 pm EST as I reveal the trading system that is producing incredible inflation-fueled returns, including top-end gains of 180%.

 

You’ll also receive my special report on how to beat inflation to inflate your trading profits when you sign up, plus attendees will receive an exclusive inflation trade. Let’s go! 

***

 

On Top?

 

We may be seeing a short-term blowoff top forming in the indexes.

 

Last week, when new highs were made, the underlying volatility actually rose.

 

This is usually a pretty reliable indicator that the market may be ready for a correction. You can see this best in the Invesco QQQ Trust (Ticker: QQQ).

 

Check out the chart below signaling historic highs in the relative strength index (RSI). Each time it has hit these levels of strength, it has corrected.

 

This coincides with the greed index also reaching lofty levels …

 

 

Another new high of 85 up from Thursday’s 82 recording. 

 

Plus we have to keep an eye on the important Shiller P/E CAPE ratio as it heads up to the 1999 dot-com bubble level of 44X.

 

 

Going back to the dot.com bubble, the market was blindsided by the turn around and crash. 

 

The other point is, tech was hardest when the market turned in 1999. Something to think about with Tesla (Ticker:TSLA) reaching nose-bleed valuations on historic call buying.

 

Trading It

 

I am going to make a bet on the Invesco QQQ Trust (Ticker: QQQ) …

 

      • I like buying the 6/6.5 call spread for $.21 to Nov. 19. I could see a spike to 6.5 to 6.75 by expiry.
      • Gross profit is $.5 while max loss is $.21, so max return is .50-.21 =.29/.21 = 135% return. Not bad for a low-risk, 2-week trade. 
      • If the move happens sooner I would just close the trade out for a 75% ish return. 

 

Bring It Home

 

The cross currents are increasing by the day … Fed scandals and Powell reappointment, China slowdown, out-of-control inflation and bubbles brewing.

 

This vertical move in stocks may be happening too quickly with a QE taper coming …

 

The next couple of weeks as the Taper kicks in will be interesting — and, of course, with my event on Tuesday. See you there!

 

Live and trade With Passion My Friends,

 

Griff

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.