All Star Options Articles

While bargain clothes shoppers seem to be driving profits in a way Wall Street likes, it takes a certain kind of trader to buy stock in the company when it's making new All-Time Highs.

Well, I just happen to be that type of trader! In fact, one of my favorite setups is to buy stocks making fresh all-time highs. There is no overhead supply of bagholders looking to dump the stock to get back to even. Nothing but blue skies ahead.

And when options premium has collapsed, we can buy long calls to put ourselves in a position to enjoy the possibility of unlimited gains.

Let's go shopping!

After some pretty significant broad market moves in both directions in recent weeks, it's starting to feel like market participants are a bit tired. And can we blame them?

While volatility is often beneficial to active traders who have a good game plan to pounce at opportunities that are presented in such environments, eventually, we get tired. It's exhausting.

Knowing this, we can take advantage of this potential situation by crafting trades that take advantage of the likely decrease of options premiums that often takes place when traders are tired and stocks and indexes start trading in smaller ranges.

So let's use the Utilities sector to express a bet on compressing ranges...

We've got an oil stock on the doorstep of multi-year highs, a recent shakeout that probably rinsed out the hot-money crowd that came into the stock following their latest earnings report, and implied volatility plumbing new yearly depths.

This sets up an excellent opportunity to take a flyer on a simple long calls trade.

Let's dig in!

With strength starting to stand out in more and more sectors, we have a few good setups that we like for long trades here.

In chatting with our Head Technical Analyst Steve Strazza today, he pushed me in the direction of today's trade by highlighting the fact that if this one moves, its likely to move much faster and stronger than a couple of the other ideas I was interested in.

And the options in this stock are set up in a way that we can play this idea with a simple long calls trade. I like that. So let's dig in.

We can't argue with price.

And price continues to tell us the Energy bull market still has legs.

Today's trade is a case in point where trading action today announced a declaration that an old-school oil services name wants to continue climbing higher.

Our commodities analyst Ian Culley couldn't have said this any better:

Energy stocks refuse to lose.

We can’t deny the relative strength of the energy space, whether we’re talking about stocks or commodities. But it’s been equities over the raw materials for months now.

They just continue to grind.

Today's trade takes us to Midland, Texas, home of the Permian Basin -- one of the richest deposits of oil and gas in the world.

"Old Economy" stocks are drawing our attention again.

Our Head Technical Analyst Steve Strazza says: "these old economy stocks are all beating earnings and taking leadership roles" and he cites companies like Caterpillar $CAT, Deere $DE, as well as energies, homebuilders, and transportation stocks.

Today's trade is an expression of the continuation of this theme, and our target stock is offering us a nice pullback to enter into.

I dunno why, but thinking about train tracks and rail stocks got me thinking of Blue Steel. There is absolutely no connection between today's trade and the pose made famous by the Zoolander film. But, you're welcome.

Today's trade idea comes straight from All Star Charts' recent Mid-Month Conference Call.

While not aggressively bullish here, I do think there is an opportunity to leverage high options premiums into a high-probability bet.

Our Ian Culley said it best:

Don’t catch falling knives!

It sounds simple enough. But in reality, traders continue to lose fingers as they reach for downtrending assets.

It's true in stocks, it's true in commodities, and it's true in bonds. It's true in any asset class, really.

And the knives keep falling left and right. Let's avoid getting our hands cut and let's just go with the trend, shall we?

While this certainly is not the market environment to be taking aggressive long bets in, there are some stocks that are displaying tremendous relative strength that we can play with strictly defined-risk positions to protect ourselves.

Our Young Aristocrats Report shows us stocks that aren’t just paying dividends but are doing so while they’re going up and thus paying us via price appreciation as well.

And this week's report serves up a great opportunity.

Here's a snippet that sums up a conversation I had with my Head Technical Analyst Steve Strazza this morning:

Me: Any trade ideas have you excited this morning?

Steve: Nothing. New lows everywhere today.

Me: I know. It's ugly.

Steve: I can give you a handful of nice charts that are breaking out, but they are all going to fail. Can't buy breakouts in this market.

Yep. That's where we're at. Putting on directional bets in either direction feels like a high risk proposition. Long breakouts are likely to fail, while short breakdowns are likely to get caught offsides in a wicked bear market dead cat bounce.

But this doesn't mean we're out of options to earn some profits. Options premiums remain elevated across the board, and we've got some areas with clean levels of support we can use as guiderails to sell some delta-neutral premium with higher-than-normal chances of success.

Put September and Q3 in the books. It was one to remember.

But we're turning the pages to October today and the rally in the markets is helping to reveal where the new strength may emerge for the next bull run, as well as some significant levels of support for beaten-down stocks and sectors.

Today's trade is fading the recent volatility against a key nearly year-long level of support in a sector that got badly beaten last month.