Today is April options expiration.
We have two option positions that expire today.
There’s nothing you need to do, but I will address those in a few minutes.
First, let us talk about how stocks continue to roar back.
We saw the broad markets pop higher today, but they are losing a little steam.
On monthly options expiration, we will see odd price action like a leaf blowing around.
This happens because option positions that expire tomorrow need to be rolled forward or closed if they are set to expire in-the-money.
The fear gauge for the S&P 500, known as the CBOE Market Volatility Index (VIX) is at 39. The VIX is still elevated, which doesn’t mean we are out of the woods.
Markets have retraced half of the recent selloff, but with volatility still elevated I remain very cautious.
It’s been frustrating several weeks with seeing red on our positions and not being able to cash in on big, quick profits.
That is why in market conditions like this, it’s more important than ever that we follow our system.
That’s how we will win over time.
The power of options allows us to become more nimble with limited risk and high-probability opportunities now more than ever.
Now let’s talk shop — we have a lot to cover.
First, let’s talk about the positions expiring today…
- Vistra Energy Corp. (NYSE: VST) April 17, 2020, $25 call (VST200417C00025000)
- Nordsrom Inc. (NYSE: JWN) April 17, 2020, $10 put (JWN200417P00010000)
Unfortunately, we don’t have more time for these positions to play out.
Taking losses isn’t fun and can be painful. That is why position size is so important.
There’s nothing that you need to do and they will be removed from your account by Monday morning.
Over the long haul, your winners will outshine the losers… We stick to a system.
- Bought-to-open the Hyatt Hotels Corp. (NYSE: H) May 15, 2020, $35 put (H200515P00035000) up to $1.10 per contract or better, for the day.
- Sold-to-close Glu Mobile Inc. (NASDAQ: GLUU) June 19, 2020, $7 call (GLUU200619C00007000) up to $1.30 limit per contract or better, for the day.
Right now, our open positions are:
- Hyatt Hotels Corp. (NYSE: H) May 15, 2020, $35 put (H200515P00035000)
- Huazhu Group Limited (NASDAQ: HTHT) May 15, 2020, $25 put (HTHT200515P00025000)
Nordsrom Inc. (NYSE: JWN) April 17, 2020, $10 put (JWN200417P00010000)
Reason: Also to our bearish Hot Money signal, Nordstrom has had issues with declining sales and tapping capital markets to raise money. The activity signaled that a possible default of bonds could be approaching.
Outcome: Expired worthless.
Notes: Our signal was correct, but I traded this wrong. Prices dropped another 30% after we entered, but our put option contract didn't increase. There are a few reasons why that happened, but the main is that I went too far out-of-the-money. Even This lose is on my shoulders. I played it too aggressive looking for a 7 fold winner.
Glu Mobile Inc. (NASDAQ: GLUU) June 19, 2020, $7 call (GLUU200619C00007000)
Reason: Our system flagged activity in the June time cycle looking for prices to spike higher during that time frame.
Outcome: closed for a break-even scratch.
Notes: Getting back to even isn’t a win, but the market drop in March put us behind the eightball. We did the right thing selling into strength. We can take the capital and use it for a better opportunity.
Vistra Energy Corp. (NYSE: VST) April 17, 2020, $25 call (VST200417C00025000)
Reason: Our system flagged activity in the April time cycle looking for prices to spike higher during that time frame.
Outcome: Expired worthless.
Notes: We were sitting in the black on this position but with expiration a few cycles out - I thought we would the share price continue to climb higher. When oil collapsed after the Saudi and Russia issue in early March, that sank all energy stocks. Looking back, we could have taken that 25% profit, but we play to win. We took our shot and this didn’t work out as anticipated.
Have a great weekend and I’ll have a new trade for you on Monday morning.
To your wealth, freedom, and options!
