Stimulus headlines continue to yank stocks back-and-forth.
Earnings season is starting to heat up but has been dull thus far.
With the election 13 days away; it’s setting up to be a November to remember.
The fear gauge for the S&P 500, known as the CBOE Market Volatility Index (VIX) is holding at 29.
That means volatility has increased by two points since last week and holds 2x the normal.
The U.S. dollar continues to dive lower which indicates more stimulus is coming, it’s a matter of how much.
This is going to have long-term effects on our economy, but let’s follow the system and focus on price, not politics.
The great thing about the Hot Money Monitor is it works in any type of market — especially the one we’re in right now.
Let’s talk about our newest position this week.
- Buy-To-Open the Hostess Brands Inc. (NASDAQ: TWNK) Dec. 18, 2020, $15 call (TWNK201218C00015000) up to $0.35 per contract or better, for the day.
- Sell-To-Close the Vonage HLDGS Corp. (NASDAQ: VG) Dec. 18, 2020, $11 call (VG201218C00011000) at $1.10 per contract or better, for the day.
I watched the order flow and some orders were filled at the $1.10 limit.
This trade is officially closed, but if you’re still in this position, you may want to exit with a market order.
Right now, we’re holding:
- Hostess Brands Inc. (NASDAQ: TWNK) Dec. 18, 2020, $15 call (TWNK201218C00015000)
Let’s keep focused and let the market come to us.
And I’ll be keeping you updated every step of the way.
Your Questions, Answered!
The mailbag is full, so let’s get to your most pressing questions.
I’m an excited new member of the Hot Money Trader.
Is your Hot Money Monitor always an entry signal? What about when Hot Money exits a trade?
Our TWNK December $15 calls are down. Would you add more?
What are your exit criteria? - Sammy G.
I’m excited to have you part of the crew, Sammy! These are all great questions, and I’m happy you asked.
To your first question, both. Thanks to my system, we can identify if options are bought or sold, and if they are opening in real-time.
When an excessive amount of options are bought, and that is greater than the daily average volume, that is someone making a directional bet with a time frame.
Likewise, when we see closing option transactions in a Hot Money trade, that is a great sign the move is over and time to lock in profits.
As to your question about our TWNK calls — because they have 58 days to expire, I did add more on this pullback.
The Hot Money monitor has picked up consecutive days with buyers in this strike and now the open interest is 20,000 contracts.
But if this was less than 21 days to expire, I wouldn’t have added and just let it play out.
Because we have many plays that will come at us, it doesn’t make sense to keep throwing money at something that is so short-term, even when they dip.
That is the benefit of using options: We take a small bet that can turn into huge gains.
Finally, when it comes to exiting a position, we always take profits into strength.
Sometimes we get prices that open much higher and create fast triple-digit returns!
Other times we just get intraday moves higher that we sell into and take a double-digit gain.
But I promise I’ll always keep you up to date and send you an alert when it’s time to exit a trade.
That’s it for me today, be on the lookout for our next profit alert!
If you want your questions answered next week, make sure you email it in today at [email protected].
Joshua M. Belanger