Dear Momentum Options Subscriber,
Given the power of strangle option trades, and with the current volatility that may or may not settle down, I have been profiling a number of these type of trades in recent weeks.
Often times, when the market is trending, it is easier to use call or put options based on the action. Given the current drama, and with October and earnings season on the horizon, stocks and the market will likely make their most powerful moves of the year in the coming month or two.
In other words, we haven’t seen nothin’ yet. There is also the chance that a powerful trend could develop this month, so the opportunity to trade directionally with the bulls or the bears will likely take shape next week. Additionally, strangle option trades can provide traders with both upside and downside protection as well as the chance to make triple-digit returns.
Of course, larger price moves in a stock or index will be needed to generate bigger returns with strangle option trades.
I will be profiling several possible strangle trades that are on my Watch List next week to give you an idea of what I’m expecting. I can’t wait until Friday’s close to get my homework done. I will be up past the midnight hour, but it will be worth it, as I plan to relax over the three-day weekend and keep Wall Street off of my mind.
However, I will have my game plan in place before the suits-and-ties get back from their summer vacations. They will either be in buying mode or selling mode, which is why I expect that a short-term trend — either up or down — could develop in the next two weeks.
Friday’s jobs report numbers, which will be released ahead of the open, will be the fireworks to end another wild week. The bulls won a round yesterday, and my gut feeling as I was writing last night was that they might win today’s session. This would bring this week’s record between the bulls and the bears to 2-2 heading into the jobs numbers.
The Dow is currently up 122 points to 16,473, while the S&P 500 is gaining 16 points to 1,964. The Nasdaq is higher by 25 points to 4,775, and the Russell 2000 is adding 7 points to 1,153.
I will be watching today’s close like always for the technical clues that might give us an edge, and I am currently watching one name that is trying to break above its longer-term downtrend line. A call option would hedge the portfolio, but I still want to keep things light until I complete my homework on the 10-year charts.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 84-32-2 (71%). All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.
Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades. Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the 9 a.m. and 12 p.m. – 1 p.m. updates. Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.
All prices given in this update are current as of 12:40 p.m. EST.
I hereby disclose that I will be participating in the following trade(s). Every Momentum Options recommendation is listed with the price at which I entered my own position. If the price is slightly different than my recommended entry or exit price when you receive the alert, don’t let that keep you from getting into or out of a trade. Occasionally, you might even get a better “fill” price than what is posted in the portfolio.
Mylan (MYL, $47.96, down $0.66)
MYL October 42.50 puts (MYL151016P00042500, $0.69, down $0.11)
Entry Price: $0.90 (9/1/2015)
Exit Target: $1.80
Stop Target: $0.40 (Stop Limit)
Action: Near-term resistance is at $49-$50, followed by $52.50. A close below $48-$47.50 would be a bearish development, as it would get a possible breakdown to $45 in play.
You can read my detailed update for MYL in the Sept. 1 Mid-Market Update.
Krispy Kreme Doughnuts (KKD, $17.28, up $0.02)
KKD November 16 puts (KKD151120P00016000, $0.95, down $0.08)
Entry Price: $1.05 (9/1/2015)
Exit Target: $2.10
Stop Target: None
Action: Short-term resistance is at $17.25-$17.50. Support is at $16.75-$16.50.
You can read my detailed write-up in the Sept. 2 Pre-Market Update.
Editor and Chief Options Strategist