During our Analyst meeting this morning, I observed the relative "calm" in the Chinese Large Cap ETF $FXI and how, while down for the day, it is still holding in a range it's been in for over three weeks now.
And we love how it's holding this range as a healthy consolidation from its late September breakout.
There's nothing about this chart that is bearish to me:
As we inch closer to the election, the "change-of-narrative" plays still hold interest to me -- both as hedges to my overall bullish positioning, and as alpha generators.
Today's trade is in a "junky" solar name that has gotten beaten down with the rest of it's sector as investors are pricing in a Trump victory that would be perceived as bearish for the Solar Industry.
But what if a Trump victory results in an inverse "sell the news" type of event and the selling pressure gets lifted from this sector? Or, better yet, what if the pollsters are wrong (it's happened before!) and Harris comes out victorious? Wouldn't that result in an immediate narrative shift for this sector? And if that happens, junky stocks like today's trade could potentially offer a tremendous amount of alpha.
I'm continuing my recent theme of portfolio diversification today with another short position, this time in a stock that should be performing well heading into Halloween and holiday season -- but isn't.
In fact, the chart looks like its got a lot of room to fall if their upcoming earnings report disappoints.
I do not recommend attempting to pick bottoms and tops. It can be a dangerous game.
Yes, when you occasionally get one right you can make a killing. But we also put ourselves at risk at getting killed. Especially fading short squeezes, and double especially if you're doing it via getting short common stock.
Smart options traders, however, have an advantage here. We can define our risks precisely. We're going to take advantage of this feature with today's trade, a bet on the unexpected.
We had a delta-neutral options position on the books that we stopped out of this week. Thankfully, it was not a big loss. It felt like the right idea, but the wrong instrument.
So today's trade is a similar trade in a stock from the same sector. We're going to take advantage of a possible continued consolidation and get out before their next earnings event.
Perhaps this is just my own personal Waterloo, but there seems to be history of market turbulence whenever I travel and am away from my main trading station.
Next week will be a travel week for me. I'll be attending Stocktoberfest in Coronado Island, back home for one day in the middle of the week, then back on the road heading to Seattle. And this being October, when "surprises" seem most often to occur, I'm a little on edge about my mostly long-leaning portfolio.
So today's trade is a simple bearish bet in a weak name that may offer some cushion if things do get slippery next week.
During the gold rush of the 1800's, there were fortunes made by some who were digging for and discovering gold.
But the REAL money was made by the entrepreneurs who were selling the pics and shovels to those gold speculators.
Along this similar train of thought, there are more than just semiconductor manufacturers that are going to benefit from the massive amount of investment done in the Artificial Intelligence space.
Today's trade is a year-long bet in one area that is starting to get attention by the AI players.
Today's trade is in household name that is emerging from a 3-year base and on the verge of new all-time highs.
Due to earnings on the horizon, we'll be utilizing a spread to keep our costs in check and take advantage of some relative high options premium in out-of-the-money calls.
The stock has had a strong runup in recent weeks. Some traders have a hard time buying stocks making highs.
I don't.
But with implied volatility relatively cheap right now in this stock, an earnings event on the horizon, and a potential "two-hundred-dollar-roll" looming ahead, this feels like the right time to take a defined risk shot.
As I've discussed recently, earnings season is quickly approaching. And with it comes risks and opportunities.
For today's trade, I'm going to leverage elevated options premiums in a nearby expiration to get a better net cost on the real call options I'd like to own.
And I'm taking advantage of a recent pullback to get in at attractive prices and a nearby exit if I'm wrong.