The economy is improving - according to the Fed.
They aren’t fooling anyone, but that’s to sugar coat another round of stimulus is the financial markets.
Stocks kicked off the week a little soft, but the major indices are rallying and now pushing into new all-times highs.
Christmas is days away, but the word on the street is that the market Grinch has quarantined.
It’s safe to say that we should see a continued rally in stocks going into 2021.
Now, the fear gauge known as the CBOE Market Volatility Index (VIX) for the S&P 500 is at 22 and above our key level at 15 — indicating that a quick shakeout can happen.
Now let’s talk shop…
Our recent hot streak of 6 winning trades in a row has cooled off a bit.
This Friday is December options expiration and our TWNK calls will expire worthless.
It will be our first losing trade in two months.
Our AMD calls also expire on Friday, but these are still in play. Maybe we get a Christmas miracle tomorrow and close out another winning trade.
If not, we’ll look to exit this position and salvage what we can.
Buy to Open Axalta Coating Systems Ltd. (NYSE: AXTA) Jan. 15, 2021, $32 calls (AXTA210115C00032000) up to $0.60 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)
- Plug Power Inc. (NYSE: PLUG) Dec. 24, 2020, $35 call (PLUG201218C00035000)
- Advanced Micro Devices, Inc. (NASDAQ: AMD) Dec. 18, 2020, $102 call (AMD201218C00102000)
- Axalta Coating Systems Ltd. (NYSE: AXTA) Jan. 15, 2021, $32 calls (AXTA210115C00032000)
Let’s keep focused and let the market come to us.
If we stick to our system, we’ll come out ahead.
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’ve noticed that some of the options you recommend will drop in price before you close them out for winning trades.
Would it make sense to buy more contracts at a lower price in the dip?” - Stan R.
That's a great question!
You'll often hear me say, markets move.
As an options trader, sometimes you’ll enter a new trade only to watch it decline double digits shortly thereafter…
This is often discouraging for newer options traders.
As you may know from our Hot Money trades, options move fast…
Which is why I prefer to use them in making big gains that increase the account value!
Even if an option declines in value right after you buy it… these are only paper losses until you close your position.
And before we enter an options position, we control our risk by knowing that the full amount is all that we can lose.
With the increased volatility right now, it’s not surprising to see our options trades temporarily pull back.
This is why we must be patient and let the market come to us.
Now, if you are feeling especially optimistic about a position that is trading lower than our entry price.
Feel free to buy more — at the lower price.
By purchasing more of a particular option in the dip, you’ll take on a bit more risk…
But you'll also lower your cost basis on your position.
That means if the options recover and turn back around, that trade will turn green quicker and increase your profit potential.
Ultimately, the buy and sell recommendations I send for the options I have chosen are guidelines.
You can follow them to the letter, or with a grain of salt.
Either way, know your risk tolerance and don’t overdo it!
Everyday the market is open is a new opportunity to make money.
But win or lose, the goal is to be able to show up tomorrow.
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