All Star Options Articles

Today's trade comes from a recent Junior Hall of Famers report.

Opportunities like this don't come around too often, but when I have a realistic shot at 10x-ing my money, I get really interested.

This is that.

I've consulted with the consultants, who agree that we should buy 52-week highs that would put us in spitting distance of all-time highs.

And so I shall do just that.

Today's name has somewhat elevated implied volatility, and it's a high-priced stock, so I'll be playing it with a call spread to keep my exposure in check and leverage the out-of-the-money call premiums in my favor.

Today's trade is in a computing company we all know. Some might think their best days are behind them, but the price action as of late would indicate otherwise.

And with what feels like a gift of a pullback to get positioned into, we're going for it!

Today's trade is in a $104B company that provides cybersecurity solutions that is printing new all-time highs.

You know how I feel about all-time highs...

It's late on Friday. Let's get after it.

Before I get to today's Options Jam Session, I want to talk about profiting from bearish moves.

Short answer: It's a hell of a lot harder than it looks.

Few people (with the exception of traders holding short positions) hate it when stocks go up. It is human nature to expect stocks to go up. When stocks are going up, everything is "normal." There's no panic. There are no investor lawsuits. There are no board room freak-outs. Everyone is making money, everyone is happy. Carry on.

But when stocks are going down, people get mad. They look for someone to blame. Big shareholders and institutions start looking for malfeasance and an angle to sue the company for fraud. Star employees get frustrated and leave for greener pastures. Customers lose confidence in the company and start exploring other options. Borrowing costs get more expensive. It gets harder to raise capital in the public markets.

All kinds of bad things happen when stocks go down. So companies deploy all kinds of weapons (some legal, some questionable) to try to stop the stock from going down. They issue buybacks. They issue bullish press releases. The executives go on TV and...

I think I surprised JC during this morning's internal analyst Call. He asked me if I had any "spicy trades" in mind.

In fact, I did have one.

It's a bet on an upcoming earnings release kicking a dog semiconductor stock while it's down, sending prices even lower.

Suppose you're watching the evening cable news, reading the New York Times (or newspaper of your choice), or paying attention to your echo chamber on the socials. You'd be right to assume all the economies of the world (both friends and enemies of the U.S.) are staring into the abyss and their stock markets are about to be cut in half.

That's cool if you'd like to live that way. I doubt it'll make you any money, though.

You're smarter than that. This is why you're here. We're not affected by headlines. We follow price.

And the relentless bid in Chinese stocks cannot be ignored.

Regardless of the market environment, a company like Visa will keep printing money. 

Considering the vast majority of purchases involve credit cards these days and Visa is a dominant player in the space, Visa takes a small cut every time you swipe or tap your card. Good business to be in!

And the chart of $V backs this up.

I'm at the All Star Charts Portfolio Accelerator event in New York City. 

One topic I discussed this morning with everyone is a volatility-triggered setup I'm seeing in the iShares Bitcoin ETF $IBIT. We have a short history to work with, but this bears attention.

News over the weekend seems to have spooked investors this morning, particularly in the tech sector. And the effects are spilling out all across the market.

Are investors being a little overly dramatic here? 

The bet we're making is YES.

Today's trade is not in a tech stock, just a boring old bank that has been trending higher for over a year now.

Today's relatively short-term trade has an earnings catalyst, and I'm betting it will propel us to profits.

The stock has already had a stellar run over the past 52-weeks. Will the upcoming earnings mark the top? I doubt it.

Here's a one-year chart of a technology company that specializes in mobile app growth and monetization solutions -- Applovin Corp $APP:

As strong as this stock has been, it looks like it's setting up for another leg higher. And the upcoming February 12th earnings report just may be the catalyst the market needs to send this stock flying again. 

Of course, earnings can be a wild card, so it'll be important to define my risks.

Here's the Play:

I like buying an $APP February 400/450 Bull Call Spread for an approximately $11.50 debit. This means that I'll be long the Feb 400 calls and short an equal amount of the 450 calls. This debit I pay today is the most I can lose in a worst-case scenario:

I'm going to hold this trade, no matter what, through the February 12 earnings event.

On February 13th, my stop becomes $400. If $APP is below $400 per share, I'll close the spread for...

Today's trade leverages the flexibility of calendarized options spreads to put us in a long, free position for a potentially long ride.

This would be a highly desired position of strength.