Wednesday's Options Alerts

Life really is like a box of chocolates. Friday, with the indices reversing to close poorly, the appropriate trade was to lean short...hopefully, we're all "Gump-like" and willing to quite simply trade prices and let bygones be bygones, because in Monday's trade, that was the best decision to make. Monday's lethargic start higher, out of an opening reversal (which was coincidentally alerted to in our TM LiveAlerts), although unexciting, provided the best opportunity to "take in" any position shorts. 

With a trade labeled as potentially damaging, such as the gamma trade in our example, taking in stock off the Opening Reversal wasn't what the position "wanted", but ego aside, it was the right way to execute, as far as money management. The Diamond 85 level calls were what I refer to as "rip ups" in my gamma trading article. The stock bought in around 82.60 off of Kevin Haggerty's strategy, to clean up the stock portion was essentially a push as the net short delta position had been averaged at 84.15. Net, net, approximately breakeven, with still some slight premium risk, as the calls that were originally purchased for 1.65 versus stock, at much higher levels, were trading for .10 to .15. This is what ultimately made the last scalp decision an easy one. The willingness to "let it ride" short over the weekend was a calculated decision, that once voided (the opening of trade Monday) needed to be reassessed, according to what the market was doing in the now, and how the position could best participate. If you don't understand all of this, do take the time to read my article mentioned above, as it goes thru a very similar example...all we need now is a push through the 85's to make these "rip ups" worth something. Of course, with the benefit of hindsight, an outright call position on "the same line" at yesterday's market prices, could have given us the exact same position..."but what doesn't kill us, only makes us stronger", and besides, I always like to "stay spread to stay ahead".

The volatility levels as measured by the VIX continue to play "stupid human tricks". The price action is stretching the bands as it tests Year-To-Date lows, and gives off multiple CVR signals. This will present opportunities, but always remember to respect price and volume first. Tomorrow might just present the next gamma trade opportunity!!

Points of Significance:

Abnormal Options Volume -- This list includes both percentage movers that are normally associated with an increase in options activity, as well as stocks that have unusually high activity and / or technical situations, reflecting increased speculation of a potential price move.

Stocks With Spikes in Implied Volatility -- Stocks with Increases and Decreases in implied volatility compared to previous day. Candidates are then screened qualitatively. These lists represent those issues that carry a blend of liquidity and/or technical setups that might deserve further notice. 

Spike Up

Spike Down

Please use stops on every trade!