As the markets continue to be far more bearish than bullish, I have yet to find a long stock trade that meets my criteria. Finding a Very Bullish Stock that has maintained an uptrend is beginning to feel a lot like searching for a unicorn riding a rainbow.
Since long stock opportunities have been pretty scarce, I've traded a few Bear Call spreads to keep myself engaged. A quick refresher, a Bear Call spread is a risk defined option trade where you collect a credit on a bearish bet. I typically sell the .30 delta and define my risk buy buying an option further out of the money, typically 2 strikes away. At .30 delta, your sold option has a 70% chance expiring worthless, but roughly a 60% chance of being "touched" at some point before expiration. So, you can't get too nervous if your short strike gets breached at some point. I typically hold these spreads until 1 of 2 things occurs.
1.) I reach 50% of max profit
2.) The short option expires in 5-7 days.
Earlier This Week I took a Bear Call trade on $CAT. The Chaikin platform signaled an "Overbought Sell" last Tuesday.
Since long stock opportunities have been pretty scarce, I've traded a few Bear Call spreads to keep myself engaged. A quick refresher, a Bear Call spread is a risk defined option trade where you collect a credit on a bearish bet. I typically sell the .30 delta and define my risk buy buying an option further out of the money, typically 2 strikes away. At .30 delta, your sold option has a 70% chance expiring worthless, but roughly a 60% chance of being "touched" at some point before expiration. So, you can't get too nervous if your short strike gets breached at some point. I typically hold these spreads until 1 of 2 things occurs.
1.) I reach 50% of max profit
2.) The short option expires in 5-7 days.
Earlier This Week I took a Bear Call trade on $CAT. The Chaikin platform signaled an "Overbought Sell" last Tuesday.
The Trade went against me almost immediately, and has since broke above the the LT Chaikin trend and the trend indicator has turned strong. This is not a trade I would enter now, but I'm already in it, so I'll follow my rules and ride it out. The stock is very overbought, has negative relative strength and while money flow has turned positive, not by much.
My max gain on this trade is the .87 cents received max loss is the difference between the strikes minus the credit. , I need $CAT to get back under $62.50 and stay there either until march expiration OR until I can buy this spread back for around .44 cents. The most I can lose on this trade is 163.00 per contract.
I'll keep you posted on the outcome.
I continue to look for long stock opportunities, but as they say, you only have what the market gives you.
Please leave any comments below, I'd love to hear from you!
Happy Trading.
AA
I'll keep you posted on the outcome.
I continue to look for long stock opportunities, but as they say, you only have what the market gives you.
Please leave any comments below, I'd love to hear from you!
Happy Trading.
AA
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