Trade Ideas | 10/15/18

October 15, 2018

IV remains high across the market as buyers and sellers seem to be in a standoff. There's not a lot of will to send the market higher or lower ... yet.

 

Because a lot of stuff is on the move and at price extremes, this list will contain more directional trades than usual.

 

High IV, Delta Neutral

 

$C - Citigroup reported earnings last Friday, yet IV remains relatively high. This is probably reflective of the overall nervousness in the market right now, however, I still expect IV in $C to drop as is normal post-earnings. An Iron Fly is the best way to play this because trying to construct an Iron Condor is too difficult because of strike selection (This is technically breaking a rule laid out in the Comprehensive Trading Course - so proceed with caution)

 

$XLU - Utilities gave up their recent gains because of the market turmoil of last week. Again, I expect things to calm down this week and for IV to drop, so selling a Tight Iron Condor in $XLU would be a good way to play that.

 

 

Directional Trades

 

$GLD - Ah, here's the pop in gold that I was expecting during the initial market sell-off. Why it's coming late is beyond me, truthfully, but it IS late. $GLD looks short-term overbought and if it looks like it is going to close below where it opened today, I think a Bear Call spread is a good way to play a short-term down move; this is also a good way to play declining IV, which happens when $GLD trades down, not up.

 

$EWJ - Global markets trade in tandem when they sell off and Japan was included in last week's drop. Today however, we are seeing an attempt at a bounce. If it looks like $EWJ will close above where it opened, a simple Bull Call spread is the way to go - there isn't enough premium to be had in OTM puts for it to be worth selling a Bull Put spread.

 

$XLE - Oil and Energy stocks are selling off too, but this has some headline risk because of recent events in Saudi Arabia. $XLE is trading near strong support levels, so if you want to take a risk, I'd say selling a Bull Put spread here is OK, just keep it on a short leash.

 

 

 

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