The Blow off Top For 2020?

November 11, 2020

Markets started the week off red-hot as Pfizer and BioNTech joint COVID-19 vaccine will likely available for high-risk cases in a few weeks.

But then we started to see a divergence happen right after the market open.

The beaten-down names started to spring back to life as the great tech trade unwind.

And you were best positioned to profit from this with the opportunity to lock in a gain of 263% in our WFC calls on Monday.

By the end of the day, the Nasdaq closed deep in the red and continued into Tuesday’s session. 

The announcement of the vaccine is a typical ‘sell the news’ event and a perfect signal for a market top.

Since professionals need to keep money invested, they keep moving it around.

This isn’t ideal because we want to see inflows into the market, not rotation into dead stocks while leading stocks drop like rocks.

We did see a slight pullback in the fear gauge for the S&P 500, known as the CBOE Market Volatility Index (VIX), but it’s still holding at 24 despite the S&P 500 hovering around all-time highs.

The volatility structure is showing that the market a little more short-term risk in the next 35 days.

This falls in line when electors meet in each state and cast their votes for the president and vice president on December 14th.

All I can say is that things are going to get interesting in the coming weeks, buckle up!

Portfolio Update

On Monday:

  • Sell-To-Close the Wells Fargo Company (NYSE: WFC) Nov. 20, 2020, $24.50 call (WFC201120C00024500) at the market.
  • Buy-To-Open the Sandstorm Gold Ltd. (NYSE: SAND) Jan. 15, 2021, $10 call (SAND210115C00010000) up to $0.20 per contract or better, for the day.

Right now, we’re holding:

  • Hostess Brands Inc. (NASDAQ: TWNK) Dec. 18, 2020, $15 call (TWNK201218C00015000)
  • Sandstorm Gold Ltd. (NYSE: SAND) Jan. 15, 2021, $10 call (SAND210115C00010000)

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.

“Hi, Joshua,

You have stated that there is no way to tell who is buying these calls, just that large positions are opened. Nor is there any way to know who might have a large short position, but if you see that there is a lot of short interest, which is public knowledge, might that affect the probability of prices rising as you predict? -Andy R.

You can look through the 13F filing on a company to see if any fund has a large enough short position reported or look at its overall short interest.

I do look at short interest— and it can be one of the best fast money trades because of forced buying.

Here’s the thing: Wall Street must keep money at work to get paid their fees.

It doesn’t pay to buy protection; it’s a lie that is sold to the public for the sole reason of keeping money in the market.

If you were worried about the direction of a stock and were sitting on profits, you would just exit that position.

If a fund went out and bought a large number of calls for a hedge against their short stock position, I would see that as bullish.

That shows they are concerned about a catalyst that could cause prices to go higher.

Long term they could be right on their position, but we are focused on the short-term.

If I submit an order to buy an option contract with “TIF” specified as “day” and it’s not fulfilled by market closing, does one attempt again with TIF as day or adjust the TIF to “good till canceled”? - George H.

If the price of the option goes over our buy-up-to price, the best thing to do is to try your order again the next day or wait until the next trade.

I try to make it as simple as possible to get and out of trades, safely and profitably.

Unfortunately, there are some nuances and terms that we must get familiar with.

I know it is frustrating when you are trying to place a trade and markets are moving fast or you didn’t get filled.

I get it — you don’t want to chase the price, but you also don’t want to miss a potential big gainer.

You could always use a market order, which will get your trade filled instantly.

If you do, know you may pay more than what we’re tracking as our official price in our portfolio.

I aim to send you at least one Hot Money trade a week. So, there will always be another trade around the corner.

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
Joshua Belanger is founder of CounterVest and the editor of Hot Money Trader. He has been providing ordinary investors blockbuster returns since 2008. In 2018, the average return of Hot Money Trader beat the markets by over 15%