© Copyright 2022 eOption, a division of Regal Securities, Inc., Member
FINRA/
SIPC |
Important Disclosures
950 Milwaukee Ave., Ste. 102 | Glenview, IL 60025
The information on this web site is for discussion and information purposes only. All accounts accepted at the discretion of eOption which accepts customer orders only on an unsolicited basis, and does not make any recommendations regarding any security or securities product with the possible exception of orders executed by our full service bond desk. Nothing contained herein should be considered as an offer to buy or sell any security or securities product. Online trading has inherent risks due to loss of online services or delays from system performance, risk parameters, market conditions, and erroneous or unavailable market data.
FINRA BrokerCheck reports for Regal Securities and its investment professionals are available at www.finra.org/brokercheck.
Options Disclosure: Options involve risk and are not suitable for all investors. Prior to trading options, you must be approved for options trading and read the Characteristics and Risks of Standardized Options. A copy may also be requested via email at support@eoption.com or via mail to eOption, 950 Milwaukee Ave., Ste. 102, Glenview, IL 60025. Online trading has inherent risks due to loss of online services or delays from system performance, risk parameters, market conditions, and erroneous or unavailable market data.
eOption Commissions: Broker-assisted orders are an additional $6. Option strategies involve multiple purchases; therefore your transaction costs may be significant for option strategy trades. A commission rate of $2.00 for equities and $3.99 + $.10/contract for options, per execution, applies to orders entered and filled by eOption's Auto Trade Desk and does not apply to customers who enter their trades directly into the eOption platform and are not utilizing the Auto Trade desk.
Broker Comparison: The competitor rates from published websites were verified on 3/1/2022 and are believed to be accurate, but not guaranteed. Commissions are subject to change without notice. At some firms, commissions may not reflect broker-assisted fees, orders over 1,000 shares, penny stock trades, OTCBB, pink sheet stocks or foreign stock orders. Firms may offer reduced commissions if additional criteria are met.
Blog & Commentary: eOption is neither affiliated with, sponsored by, nor endorses commentary and the opinions expressed are solely their own. Content is provided for educational and informational purposes only and eOption cannot attest to its accuracy or completeness. No information provided has been endorsed by eOption.com and does not constitute a recommendation by eOption to buy or sell a particular investment. You are solely responsible for your own investment decisions, and eOption makes no investment recommendations and does not provide financial, tax or legal advice.
Take Profits Into Market Strength and Go To Cash – Trouble In August
www.1option.com
Yesterday the market was able to find support and buyers surfaced late in the day. Overnight news of successful clinical trials has investors excited about Moderna’s Coronavirus vaccine. The S&P 500 will open near the high established Monday and resistance at that level will be challenged. Buyers are typically engaged ahead of earnings season and the price action should be bullish for the next two weeks. Use this opportunity to take profits and to reduce your risk exposure. I believe that the market is vulnerable to profit-taking in the back half of August.
There are many promising vaccines that are currently being developed and there is a good chance that they may come to market before the end of the year. The Coronavirus is spreading and many states are stuck in Phase 3. There are also major cities that are considering a complete shutdown. This will dramatically lengthen the economic recovery and credit issues are likely to surface. According to an article in The Hill, 23 million families face eviction in October. Without question, additional stimulus will be needed.
Congress is trying to pass a bill and they are likely to get it done before they go into recess in a few weeks. Democrats want to continue the PPP program that adds $600 per week to unemployment benefits. Republicans want a one-time payment of $1200 per taxpayer. Regardless of which path we take, the next helicopter drop is likely to happen.
A vaccine is critical, but it won’t be available for months (at best). We still have to endure many months of a dismal economic growth and there will be business failures.
Swing traders should limit new bullish put spreads. I believe that we will have a few good weeks before risk is elevated. The decline we saw Monday afternoon was a warning sign and you should start reducing your bullish put spreads into market strength. You can buy them back for pennies or let them expire. Don’t put many new trades on. There will be opportunities to sell out of the money bullish put spreads on stocks that have positive earnings reactions, but these positions should be very limited. Once we are in cash, we will monitor market conditions from the sidelines and we will wait for the next window of opportunity. We’ve had a fantastic year and I don’t want to give those profits back. We sold out of the money bullish put spreads in the first two months of the year and we were on the sidelines during the crash. Before the market reached its low we were selling out of the money naked puts with incredible success. When support was established in April we aggressively sold out of the money bullish put spreads and we continued until now. Good news is priced into the market and I believe we are going to hit a rough patch in a month (or less). Instead of managing losses, we will be looking for opportunities to deploy our cash.
Day traders should wait for support this morning. Opening gaps higher to resistance have a tendency to reverse. I will be watching tech stocks on the open to see if they still have “gas in the tank”. If we are going to see a gap reversal, it will happen in the first 45 minutes of trading and we will see long red candles closing on their low very early in the day. Once support has been confirmed we can buy stocks with relative strength. We’ve seen an incredible amount of intraday volatility in a 100 S&P 500 trading range during the last week. It’s impossible for me to tell you how the day is going to play out before the open. We will use the 1OP indicator to time our longs and shorts.
Swing traders should use this opportunity to get to a cash position and to reduce risk during the next two weeks. Day traders should look for early opportunities. Reduce your trade count and your size. I will be trading half-size in the morning and quarter size in the afternoon. I still view this as a low probability trading environment.
Support is at SPY $312 and $317.40 and resistance is at $322.70 and $323.40.
Content is provided by OneOption, LLC, which has no affiliation with Regal Securities, Inc. (“Regal”) This commentary is provided for information purposes only, and is not a recommendation, offer or solicitation by Regal to buy or sell securities or to adopt any investment strategy. Regal has not participated in the creation of the OneOption content and does not directly or indirectly endorse the content. Any reliance on this material is at the sole discretion of the reader.