Trade Ideas | 10/24/18

October 24, 2018

Volatility is back and rising, and with good reason. People are afraid of tariffs and trade wars, but those have been ongoing for most of 2018, yet the worries only lead to selling every once in a while. Meanwhile, 10 year treasury yields remain above 3%, something the market also doesn't like. You've got the US mid-term elections right around the corner, and a massive "caravan" of migrants storming towards the southern border just in time for them. It doesn't surprise me that the market is "risk-off" at the moment at all.

 

Therefore, I think it would be unwise to load-up on risk right now. Here are just a few trade ideas on stocks that are bucking the selling trend:

 

$VZ - Verizon had earnings this morning and is trading a bit higher on that news, shaking off the market. I think the price will stabilize and IV will drop quickly back to normal levels. Thus, an Iron Fly for Nov30 expiration would be a good selection here.

 

$UAL - Yes, United Air Lines is selling off today, but, the price is now in the middle of a range that has held since July. An Iron Condor for Nov30 expiration covers that entire range, and by trading an Iron Condor, that gives options for adjustments should $UAL decide not to hold this range.

 

$GDX - Gold is surprisingly not trading way up, despite the market trading down. I think it's upside is being held back by the fact that the US Dollar is trading up and so are US interest rates. Gold likes dollar down, rates down more than it likes the equity market selling off. However, I think the Fed may cool it on raising rates in December, as the futures market predicts, if this "trade war" takes longer than expected. For those reasons I think the gold miners at least stay range-bound, so an Iron Fly for Nov30 expiration would be the way to go.

 

 

 

Going forward into next week, keep an eye on $MU and the energy ETFs $XLE and $XOP. Both could be good contrarian plays to the upside if we see a reversal candle outside the bottom Bollinger Band.

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