Dear Momentum Options Subscriber,
The bulls are trying to recover yesterday’s losses and are on track for the weekly win, providing current gains hold into the close. The monthly gains and losses will likely be split, with the bears holding the Dow and S&P 500 hostage.
The S&P 500 is nearly free, however, as the index just needs to clear 2,171 to get the monthly win. The Dow needs to clear 18,401 to see green pastures for September.
Deutsche Bank (DB, $13.12, up $1.65) is up 13% today and is giving financial stocks a lift after agreeing to a lesser settlement with the United States Justice Department. The company was looking at $14 billion in penalties as part of an investigation on the bank’s underwriting of residential mortgage-backed securities, but the news is that it has settled with U.S. regulators for $5.4 billion.
The recent volatility caused DB shares to trade to a 52-week and all-time low of $11.19 yesterday. Although it is still early, a temporary “double bottom” may have formed, as shares kissed $11.23 on Monday as well.
Bullish traders are buying the DB October 13 calls (DB161021C00013000, $0.80, up $0.50) in droves, as nearly 7,000 contracts have traded today. These options opened at $0.55 and have traded to a high of $2.09. The DB October 15 calls (DB161021C00015000, $0.15, up $0.11) have traded over 11,000 contracts today, opening at a nickel and kissing $0.20.
Obviously, I wouldn’t go chasing the aforementioned options at current levels, and buying put options can be risky given the rebound. Put option traders were minting money yesterday on the backtest to $11, but they were caught off guard today if they didn’t get out.
The volatility will likely continue in shares of DB, and I will keep watching the action in case I see an opportunity to go long or short. In the meantime, I’m going to let the dust settle while considering a possible strangle option trade using call and put options.
The Dow is currently higher by 185 points to 18,329, while the S&P 500 is gaining 19 points to 2,170. The Nasdaq is up 47 points to 5,316, and the Russell 2000 is climbing 13 points to 1,251.
I have a Profit Alert for our Kroger (KR) position and a Trade Alert for our Vuzix (VUZI) position listed below, which will close out a fabulous September. The portfolio went 10-2 for the month, and I’m super excited about October.
Stay locked and loaded into the close in case I take additional action. If you don’t hear from me again, however, have a great and safe weekend, and I will chat with you on Monday morning.
Momentum Options Play List
Closed Momentum Options Trades for 2016: 74-25 (75%). 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 12:00 p.m. EST.
I hereby disclose that I will be participating in the following trade(s).
Kroger (KR, $29.90, up $0.40)
KR October 30 puts (KR161021P00030000, $0.80, down $0.15)
Entry Price: $0.78 (9/7/2016)
Exit Target: $1.60 (Limit Order on half)
Stop Target: $0.80 (Stop Limit)
Action: The Stop Limit at $0.80 was triggered on today’s rebound towards $30, and we are now out of the position.
Vuzix (VUZI, $8.85, down $0.27)
VUZI October 10 calls (VUZI161021C00010000, $0.25, down $0.10)
Entry Price: $0.68 (9/7/2016)
Exit Target: $1.40
Stop Target: $0.22 (Stop Limit)
Action: The Stop Limit at $0.22 was triggered on today’s drop below $9, and we are now out of the position.
Halozyme Therapeutics (HALO, $12.01, up $0.11)
HALO November 13 calls (HALO161118C00013000, $0.75, down $0.10)
Entry Price: $1.07 (9/27/2016)
Exit Target: $2.15
Stop Target: $0.50
Action: Resistance is at $12-$12.25. Support is at $11.75.
Goodyear Tire & Rubber (GT, $32.24, up $0.51)
GT October 33 calls (GT161021C00033000, $0.46, up $0.06)
Entry Price: $0.75 (9/22/2016)
Exit Target: $1.50
Stop Target: None
Action: Resistance is at $32.25-$32.50. Support is trying to move up to $32-$31.75.
Viavi Solutions (VIAV, $7.32, up $0.06)
VIAV December 8 calls (VIAV161216C00008000, $0.20, down $0.05)
Entry Price: $0.51 (8/19/2016)
Exit Target: $1.05
Stop Target: $0.15 (Stop Limit)
Action: Resistance is at $7.45-$7.50 and the 50-day moving average. Support is at $7.25-$7.20.
Editor and Chief Options Strategist