Review of Session: A high inflation reading helped higher equity prices on Thursday, but it’s a day where both bears and bulls have something to cheer about. Overall, the broad strength you want for the beginning of the year remains to be absent, so opportunistic trades are the rule.
Next Session: Big decision day for SPX and NDX. If the bulls can win, then we are likely to see ATHs again. If the bears win, we’ll have to wait for a bigger dip before a sustained rally.
From the Quicksheet: WMT is on the Quicksheet and she is balanced in a wide range from 136-152. They are coiling for a move and we could go either way. The IV rank is low, so this is a perfect candidate to look for a “break from balance” via an option straddle. When the move comes, it will test either 136 or 152 first with a target to either 126 or 160 as a measured move from the balance zone.
Suppose you wanted to create an idea from this…
|OPPORTUNITY?||WMT is coiled and ready for a move with unusual low IV rank prior to earnings.|
|IDEA?||Long WMT March 140 straddle for 10.15/spread or cheaper. With a move unlikely to come before earnings, consider selling the 140 straddle expiring in 2 weeks to capture $3 in premium and help reduce the debit down to 6.15/spread.|
|RISK?||Risking the debit at 10.15/spread. The opportunity is unlimited, but hitting our targets would double the value to 20.00/spread|
|HOW WILL I KNOW THAT I’M RIGHT?||WMT breaks outside the 132-150 bracket and continues to targets.|
|HOW WILL I KNOW THAT I’M WRONG?||WMT stays trapped in the range until expiration.|
TO FIND OTHER IDEAS LIKE THIS: