The Tale of Two Indices

July 10, 2020

Market volumes have been lower this week as investors take pause and gear up for earnings season.

It reminds me of when I was back on the trading floor during the summer months.

On Fridays, the pits would quickly thin out after the market opened, with traders heading out to start the weekend off early

Tech continues to move higher hitting new all-time highs while the Dow and S&P have been lagging this week.

The strength in the Nasdaq allowed us to exit your ON Semiconductor Corp (NASDAQ: ON) July 17, 2020, $21 call as shares jumped up 5% on Thursday’s session. 

The fear gauge for the S&P 500, known as the CBOE Market Volatility Index (VIX), is at 27.

We’re seeing volatility come in, but it is still 2x the average.

Next Friday is July’s monthly options expiration.

On expirations week we tend to see broad markets drift higher.

We have twp positions that expire next week Novo Nordisk A/S ADR (NYSE: NVO) July 17, 2020, $72.50 call and GOODYEAR Tire & Rubber Co. (NASDAQ: GT) July 17, 2020, $5 put.

There’s still time for shares to spike higher, but it’s looking like this may expire before that happens.

We don’t want to force anything in this environment. Our best bet is to let the market come to us.

So, let’s stick to the plan and come out ahead.

Portfolio Update

On Monday:

  • Buy-To-Open China Mobile LTD ADR (NYSE: CHL) Aug. 21, 2020, $40 call (CHL200821C00040000)

On Thursday:

  • Sell-To-Close ON July 17, 2020, $21 call (ON200717C00021000) at $0.80 limit or better; for the day.

Right now, we’re holding these positions - waiting to closeout for more gains:

  • Novo Nordisk A/S ADR (NYSE: NVO) July 17, 2020, $72.50 call (NVO200717C00072500)
  • Vale S.A. ADR (NYSE: VALE) Aug. 21, 2020, $12 call (VALE200821C00012000)
  • China Mobile LTD ADR (NYSE: CHL) Aug. 21, 2020, $40 call (CHL200821C00040000)
  • GOODYEAR Tire & Rubber Co. (NASDAQ: GT) July 17, 2020, $5 put (GT200717P00005000)

After-Action Report

ON July 17, 2020, $21 call (ON200717C00021000)

Date: June 29, 2020

Reason: Our system spiked with $31.5 million in notional value was placed that shares would soar higher in the coming days. 

Outcome: Closed for a 6% gain.

Notes: This was played this exactly as we should. Managing risk is an essential piece of being successful. Anyone can put on a trade; it's how you manage it. Shares finally spiked higher and went in our direction, but it took too much time for that to happen. These contracts expired next Friday, and we don’t want to fall victim to hoping and praying. We did see investors rolling their previous bet into the Aug. 21 call strike.

I’m looking forward to answering your most pressing questions this Wednesday.

If you want yours included, send yours now to [email protected].

Have a great weekend and I’ll have a new trade for you on Monday.

To your wealth, freedom, and options!

Joshua M. Belanger

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%