Stock indexes are melting higher, which usually suggests unsustainable short covering. We took profits on long trades and moved into the short side. Hopefully, my head won't be hanging on a wall because of it, but the market internals and a correlated asset class confirms the move.
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Plan Your Trade, and Trade Your Plan,
Todd Gordon
The Fed talked a tough game yesterday about possible interest rate increases. Interest rate sensitive sectors got stampeded today threatening a possible end to the 7-year charge. We look at some key market setups and option trades for the next move...
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Plan Your Trade, and Trade Your Plan,
Todd Gordon
We break down our two favorite option trades in the market currently using Fibonacci analysis. Biotech is leading the charge lower, while this precious metal could be about to lift off.
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Plan Your Trade, and Trade Your Plan,
Todd Gordon
Netflix Inc. (NASDAQ:NFLX) is a very controversial high-flying growth stock with a nosebleed valuation as measured by traditional metrics such as the price-to-earnings multiple (P/E ratio) and the PEG ratio. Due to its rapid growth, expanding original programming, wrestling market share away from big cable companies, expansion into international markets and its overall ubiquity, it's easy to see why investors are willing to pay a premium. It's difficult to arrive at an accurate valuation based on traditional metrics for this media disruptor. Due to these factors and the difficulty of placing an accurate valuation on Netflix, options in the form of covered call writing may be an effective way to leverage this high-flier while mitigating downside risk. Netflix offers a confluence of volatility, liquidity and a high level of interest which gives rise to high yielding premiums on a bi-weekly or monthly basis. This confluence bodes well for those who are long Netflix and desire to leverage options trading to augment returns and mitigate risk throughout the volatile nature of Netflix’s stock. Netflix’s recent earnings disappointment underscores the value of covered call writing to mitigate losses and smooth out drastic moves in the underlying security.
Note: This article is backing my long position while opportunistically and quantitatively writing covered calls to mitigate downside risk and generate income. I provide my real life examples embedded into my long position as Netflix is intrinsically volatile.
Netflix is a highly volatile stock and swings of $10 per share (or ~8%) throughout the course of a day are all too often observed. These swings to the upside or downside can be difficult to stomach. However, one can leverage his position via writing covered call contracts to mitigate these swings while remaining long this volatile stock. Utilizing biweekly or monthly contacts one can expect to obtain a cash premium of roughly 3%-6% with a strike price that's within 3%-5% of the strike price (tables 1 and 2). Continue reading "Can A Covered Call Strategy On Netflix Bode Well For You Too?"
I was on CNBC's Squawk Box today and host Brian Sullivan asked where I thought the market was going. The truth is, we are in a pocket of high volatility with little net price change from 1 year ago. Why? We are caught in a Fibonacci Timing Zone that ended the massive bull market.
Learn more about TradingAnalysis.com here.
Plan Your Trade, and Trade Your Plan,
Todd Gordon
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