All Star Options Articles

I joined JC and Strazza today during their daily Twitter Spaces brainstorm and we got to kicking around ideas of how we want to play this market.

When prompted, I voiced my opinion that anything we do in the options space right here should involve being sellers of options. Premiums are elevated pretty much across the board. So whatever we do, let's get a tailwind to help us along. And for me right now, that tailwind is mean-reversion in options premiums.

We never know when premiums will trend back to normal, but we do know that they always eventually do. So we must position ourselves accordingly.

After kicking around a few ideas, collectively we agreed it's best to err in a household name that is unlikely to kill us if we get it wrong.

On days and weeks like this, I love to look for opportunities to sell premium into the elevated implied volatilities we're seeing rising across the board. With $VIX back up above 20, you'd think there's been plenty to pick from.

Problem is, I haven't found any delta-neutral setups that look good today. Too many busted charts on the most liquid ETFs makes finding support levels that both make sense and offer enough premium to make it worthwhile from a safety standpoint hard to find.

So, as always, I reached out to my team from some other ideas.

We've been asking the question: "how bad can things be if we're seeing this kind of relative and absolute strength in the banking and financial sectors?"

Steve Strazza served up an interesting bullish play that is either a gift of a pullback, or we're buying the top. If you're market the bullish, then you gotta believe this idea has merit.

Well well well, what do we have here?

The first two days of this week completed a nearly text book Santa Claus rally. Then on Wednesday, it appears the Fed may have stolen his Sleigh and now his reindeer have no idea which way to steer!

This indecision has played out in the options market by raising the risk premiums being asked across a wide sector of index ETFs.

At times like this, I like to go hunting for premium-selling opportunities. And I've got one teed up so lets get to it!

The All Star Charts team put a report out about the Metals sector end of last week, highlighting undercurrents investors should be keeping an eye on. Not everything is sending "all-clear" signals yet. But there is one particular name that definitely has my attention and is offering a good reward-to-risk opportunity to get involved.

I'll spare you any further preamble and we'll get right into the money quote that has me interested:

Well, we're on Day 1 of the Santa Rally and so far the fat man is delivering bigly!

Speaking of deliveries, it's likely your 2021 Holiday Season featured the services of our trade today.

Let's get right to it!

One nice thing about recent stock market volatility is that there are some bullish setups we can take advantage of with some clearly defined nearby risk levels, which give us entries with solid reward-to-risk scenarios.

And of course, in a theme we've been repeating over the past week, this volatility is also helping us more easily find where the hidden relative strength is.

So let's dive right into an idea that was surfaced in the recent Hall of Famers report.

The wild ride in the stock markets this week is nothing if not revealing to us where the relative strength is hidden!

There's always a silver lining to volatility. The vulnerable stocks get exposed, the weak hands get shaken out, and what we're often left with is a pretty clear picture of where the strength is and which names are likely to lead us higher when things calm back down.

With this in mind, today's trade comes from the latest Under the Hood Report.

With the S&P 500 wrestling with the 4700 level, I've been turning my eyes to some of our more favorable bullish setups.

On Friday, the ASC team published their latest International Hall of Famers List report. This list is composed of the 50 largest US-listed international stocks or ADRs. The team takes the 50 largest names each week and then applies technical filters in a way that the strongest stocks with the most momentum rise to the top.

The name from this list that caught my attention just saw a dramatic collapse in options volatility, making call options cheaper. And with the stock above the trigger level, it's time for us to get involved.

There is always a silver lining to slippery stock markets like the one we experienced over the last couple of weeks: Stocks that are overdue for pullbacks get them -- and sometimes hard. Meanwhile, the stocks where there is strong institutional support and/or no real bearish case to take profits reveal themselves through relative strength.

The stocks that refuse to budge during broad market selloffs are the ones bulls need to pay attention to. Because by the time the markets signal "all clear!" (do they ever?) it's usually already too late to get in. You missed it. It ran without you.

With this in mind, one of the stocks in the recent 2-to-100 Club report caught my eye.

Options premiums still remain elevated across the board and therefore I continue looking for delta-neutral premium-selling strategies to implement.

We have to take whatever the market is offering. The recent downward price action has created a bunch of resistance levels to lean against on the upside. So I want instruments that also have clearly defined support levels and high premiums for us to sell.

This leads me to...

While volatility remains elevated, I remain on the hunt for appropriate vehicles to sell premium in.

We sold premium in IWM earlier this week. Today, I'm going to drill in a little deeper into sector ETFs that are displaying the highest relative implied volatilities. This search leads me to the finance sector.

JC and I traveled to India together a couple years back to meet with Indian prop and options traders and to lead discussions at a few events. It was an amazing experience to be able to view risk through the eyes of traders that come from very different backgrounds than our own.

It should go without saying that we indulged (perhaps overindulged?) in the local cuisine. To be honest, we ate like Kings and it was wonderful. Everything we ate was fantastic and I want to go back as soon as possible. It was such a great time with great people.

So, when perusing the latest crop of new ideas cranked out by ASC team, one name with an Indian flavor caught my attention.