This week the slow and steady market rally we have
experienced this year has slowed even more, although the uptrend is still very
much intact. One option trader is betting that the Nasdaq-100 is at a near term
top at its current levels, and sold 8000 of the QQQ 69 calls expiring on 4/26
against a stock position for $0.91. This buy-write or covered call has a
neutral to bullish bias to the market meaning that it will profit if the QQQ stays
around this level or moves higher. If QQQ is at 69 at expiration the stock
position will breakeven but the option will expire worthless, showing a profit
of $0.91. If the Nasdaq-100 declines then losses on the stock position will be offset
by the $0.91 of premium collected on the options. Lots of traders and investors
are having a hard time seeing how the market will be able to rally
significantly higher from here in the near term and are concerned about the
seasonal “sell in May and go away” trade that could pressure the market. If you
are in this camp then consider a covered call like this. This position is less
risky than a simple long stock position because it will allow you to continue
to profit if the market simply sputters and stalls here and also cushions the
downside if we do see a sell off. The other option is to buy puts, which, even
with volatility near multi-year lows, can be costly. We currently have many of
our clients in strategies like this in order to collect income as we wait for a
clearer indication of what direction the market will take next.
Why oil is repeating a pattern from the crash in 2008! What it means for stocks! #EAVOL #SPY https://t.co/pzacS9Gc5r
Why oil is repeating a pattern from the crash in 2008! What it means for stocks! #EAVOL #VIX #SPY https://t.co/pzacS9Gc5r — Brian Stutland (@BrianStutland) Jul 15, 2022 Source: @BrianStutland July 14, 2022 at 08:41PM More info Your Website/Page Anchor Text Here
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