After the gap down this morning there was not that much action in the market. Financials were the worst hit today while tech was modestly down, with each name in FANG down around a couple percentage points. Even though the VIX was flat today, despite the 2% down move in the S&P, option premiums were very expensive the whole day, leaving me unable to buy any premium.
As the week comes to an end there is a lot to reflect upon in regards to the trades that I put on. With Friday’s crazy session finally coming to an end it is time for this weeks Hindsight Trader blog. I am going to go over all of the big trades I put on this week; what worked and what didn’t work and how we can learn from these trades going forward.
Covered Call Ideas:
The purpose of covered calls is to slowly collect income on stocks by lowering one’s average cost. It is a good way to put on a bullish bet while minimizing your risk. While it does limit your potential reward, this tool can come in handy for those wanting to invest in a stock but on a pullback rather than at current prices. The names each month will most likely change. However, should I be forced to hold onto the stock past expiration because the covered call expired OTM, I would be comfortable doing so. In turn, I am only choosing names I feel confident about long-term. While there are many names with very attractive premium selling opportunities, especially high-beta tech names, most I would not be comfortable holding long-term as I think valuations are stretched. Below are 5 covered call trades that I like for the next month.
Today’s trading was the epitome of relief rally, as the market gapped higher by more than 1.5%. However, soon after the open the market stalled and we started to see many bearish candles in financials and technology names as they started to give back early morning gains at around noon. At this time, I had the mindset that the market was unlikely to break highs from last week as the momentum does not seem to be there. At the same time, I do not see a reason for the market to pullback much (this week) because it seems that the Brexit will not come to fruition. In the article I will go over how I am trading my prediction and why I chose this strategy over other possibilities.
