Trade Ideas | 10/30/18
Happy Halloween! The market is spooking people, that's for sure. IV is way up across the board and that leads to opportunities, but choose your battles wisely. You don't want to get caught holding the bag...
$IWM - It's been basically straight down for the Russel 2000, and the index is sitting around the February lows. Since I don't think the economic picture has really changed that much since, I'm cautiously optimistic that we're near the bottom. IVP is at 98, higher than it was back in February, and that means put premiums are fat. I'd say sell the 139/142 put spread for December ... and get out of dodge if we slip below 142.5
$XLE - In last week's ideas I said to get ready to go long energy. Now I don't think it's ready yet, I'd like to see some follow through first (i.e. trade and hold above today's highs in tomorrow's session) before getting in. There will likely be a fair amount of resistance at 67, but if we break that it will trade right to 69, where I would exit the December 62/64 put spread. Take losses if it breaks 64.37, recent lows.
$T - Just had earnings and is trading up off the lows. IV remains high after earnings because of market turbulence, so, I'd look to sell a bullish Iron Fly centered around the 31 strike for December. With that, there is more risk to the downside, but it is a negligible difference. I want to give this room to run since I'm anticipating a market recovery over the coming weeks.
$GS - Virtually the same story for this stock - IV remains high despite having already had earnings due to market turbulence. So, again, I'd get delta neutral and sell and Iron Condor for December (I'd personally prefer an Iron Fly but with the risk parameters I use it isn't possible).
$EWZ - Brazil just had there election, a binary event like earnings, but IV remains pretty high. I'd look at an Iron Condor for December. $EWZ has been paying well these last couple months.
$TWTR - Again, similar story to the previous three ideas. I'd look at a tight Iron Condor instead of an Iron Fly because $TWTR is trading between two strikes at the moment @ 33.56. So, sell the 33p and the 34c basically.
Again, I'm cautiously optimistic that we're near the bottom, but I don't think we're quite there. Be wary and be prepared for fast moving markets. A scratch in this environment is better than a loss, and we can always come back once the dust has settled to try again. Be nimble!