Category Archives for Options
A Trump vs. Clinton Options Strategy
Tonight we’ll see the first US Presidential debate debate between Donald Trump and Hillary Clinton. I’m going to leave my personal opinions about both candidates out of this, and keep it focused on the markets. A major reason biotech (IBB) has rallied in recent weeks was Hillary Clinton’s pneumonia diagnosis. Since she has been an outspoken critic of rising drug prices — specifically targeting Mylan’s (MYL) Epipen — she is seen as an enemy of biotech and big pharma. Her illness boosted Trump in the polls, which in turn gave biotech a reprieve. That’s perhaps a bit ironic, because Trump himself has been critical of drug company pricing practices. So heading into the debate, there appears to be a binary outcome — not between the candidates, but whether or now there is a decisive outcome. If it’s a close call, that will just add to the confusion and the impact on stocks is a wash. But if one side scores a big victory, odds are these stocks move, at least in the early going. So I’d look at the following trades depending upon one’s stance about the outcome: Benefits from a big Clinton or Trump victory: -Buy IBB $295 straddle expiring October 15 for $7 (give or take 10 cents) Benefits from a stalemate: -Sell IBB weekly $285/$290/$300/$305 iron condor expiring Friday for $1.88 (give or take 5 cents) I’d keep any positions small, and would look to close out either one tomorrow on the open.
Continue Reading -->Apple Options Breakdown: Traders Can’t Get Enough!
Traders are loving them some Apple (AAPL) today. The stock is ripping up 3.9% on a perfect storm of good news. First, one of the new iPhone 7’s biggest rivals — the Samsung Galaxy Note 7 — has been recalled due to exploding batteries. Yesterday, T-Mobile (TMUS) and Sprint (S) reported huge pre-order numbers, and now there is chatter about strong pre-order activity. Today, CEO Tim Cook appeared on Good Morning America and discussed “augmented reality,” which he believes is more commercially viable than virtual reality. That’s a clear nod towards a major new product category. Plus, the new iPhone 7 and Watch Series 2 are getting very positive reviews. But while the stock is ripping, the real action is in the options. 843K call options have traded today. This is 2.5X the average daily volume over the past 10 days. And it’s not even lunch time yet! The put-call ratio ratio for Apple options today is 0.29. The 10-day average is 0.65. So normally, about 1.5 Apple calls trade for each put. Today, 3.4 calls have traded for each put. We could be setting up one heck of a “sell the news” reaction but for now the ride is pretty nice!
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