Category Archives for Trade Ideas

​The market has been selling off like a ban​shee. Though it can be quite scary at times, ​the ​volatility is a premium seller's dream. ​In a higher vol market, I prefer to stick to the indices since individual stocks can sometimes make ridiculous moves. ​ Tomorrow I'll be focusing on the ​Diamonds (DIA). In the last five days of trading, DIA has dropped -8% from peak to trough. Now that's some vol baby. I think the down-side is limited after such a drop. And when vol is elevated, I like to sell the 30 delta puts for the extra juice since fear is almost always overpriced. You can sell the DIA $236 puts in Jan expiry for $3.57 with an 85% chance of making 50% pop in the next 38 days. 

​The last two months have been pretty incredible in terms of elevated volatility. The change in investor sentiment from last year is ​shocking. Last year, everyone and their ​mother loved ​tech stocks. Now, everyone and their ​mother, ​father, ​brother and sister hate tech stocks. With the ​VIX at 23, I prefer to play the indexes. And always the contrarian, I'm eying the $154 puts in Jan expiry. You can sell them for $3.08 with a 82% probability of making 50% pop in the next 39 days. 

​The market can be a tricky bastard. At one point today, the S&Ps were down over -80 pts or -3% but closed just about flat. Such a daily move in last year's low-vol market would have sent Jim Cramer into an end of world tirade....again. But  for whatever reason, 2018 is different. Its ​the year of higher volatility. In other words, its the year of​ options sellers. Pick a stock, any stock. I like Apple because it's really been beaten up in the last month and its higher IVR shows. Buffett owns it and the company is buying back shares, so its hard to imagine AAPL falling much further. That's why I like selling the 165/195 skewed strangle in Jan expiry for $4.58. The trade has 83% probability of making 50% pop in the next 42 days earning​ 11.71 in theta per day.

​The market got absolutely shellacked on Tuesday. ​​Trade worries, inverted yield curve, this and that. All I know is investors freaked out and dumped equities. Overdone? Of course! In particular, the Russell 2000 Index got hit extremely hard, down over -4%. If you're like me and think this move is ​a bit dramatic, then consider selling the -30 delta put in IWM in Jan for $2.61. The trade has a 85% probability of making 50% profit in the next 43 days. 

​UNG squeezed the living bejesus out of energy traders last month. It's had quite a run and its IVR is still above 50%. Although it's cold as hell in Chicago, I think natural gas is overextended in the short-run. That's why I'm selling the $45 calls in Jan for around $1.70​. The trade has an extremely high probability of profit but I'm staying small just in case they need to squeeze more traders out of what is a layup of a position. 

​Oil is on its butt. Crude is closing in on $50 a barrel as it continues to tumble in the backdrop of rising ​inventories in the US. But I very much doubt that​ behemoths like Russia and Saudi Arabia are going to let the US sink the price of the black stuff much further. There are rumors that OPEC is close to making a stealth cut​. I​'m a contrarian at heart, so I have no problem selling the XLE ​$61 puts in Jan '19 for around $1.20. The trade has close to 90% probability of reaching 50% max profit before expiry. 

​Ever since Elon Musk made amends with the SEC last month, TLSA stock price has risen $100​. Smooth sailing ahead? Not so fast. Recent data suggests that the China-US trade war is taking a chunk out of Tesla's sales which dropped 70% from a year ago. I'm bearish in the short-​term given Trump is hell-bent on a trade war and Musk can't go more than a few weeks without saying something foolish on twitter (they ​share that in common). Therefore, I'm going to add some negative deltas to my portfolio by selling the $385 calls in Jan '18. The trade has more than a 90% chance of achieving 50% max profit before expiry.