Countdown Test

00days 00hours 00minutes 00seconds 2020-12-25 12:00 AM     00days 00hours 00minutes 00seconds 2020-10-25 12:00…

Can you feel the volatility in the air? I sure can. Last night, Iran retaliated and attacked U.S. military bases in Iraq — my heart goes out to all the soldiers and families. The markets experienced a harsh sell-off last night after those headlines…

However, the S&P 500 futures actually reversed early this morning… and were trading higher. Talk about whipsawy price action. As traders, we can’t always focus on the minutiae, we just march forward and place trades on our best ideas.

Right now, one of the biggest themes in the market is the “January effect”. Basically, stocks that were beaten down last year may be primed to bounce, because traders and investors want to buy them back on the cheap—after selling them for tax purposes.

In other words, it’s a seasonality play… and a lot of the time, if you’re able to spot these plays, you could find some monster winners. The thing is, small-cap momentum stocks tend to be where it’s at for the January effect.

Heck, just take a look at what small-caps did last January…

 

 

The iShares Russell 2000 ETF (IWM) had a monster rally and finished January 2019 more than 12% higher. Now, I’m not calling for the same time of price action this January, especially with all the political tensions.

In fact, I am highly selective with my plays, strictly looking for my fish hook and rocket patterns.

It’s still the first full week of January, and I think we could see more seasonality plays. So today, I want to walk you through my $12K winner in a January effect play.

 

 

How I Spotted A $12K Winner In OSTK

 

The other day, I alerted my clients about a potential January effect play in Overstock.com Inc (OSTK).

Here’s what I sent out to my Jason Bond Picks clients, letting them know OSTK was on my watchlist.

Stocks I’m looking to buy soon for January effect are OSTK and I, hopefully in the middle $6’s on both. No rush for new positions since the market is likely to see some selling early this week. Swing trades with hold times ranging from a few days to a few weeks is what you should expect here.

Why did I like this play so much?

Well, OSTK got destroyed and lost more than 50% of its value in just a few months to cap off 2019.

 

 

Remember how the January effect play works. We’re looking for beaten-down names in 2019.

However, I’m not just randomly buying weak stocks because that’s the quickest to get your shirt handed to you. So what did I see in OSTK?

My trusty fish hook pattern.

Basically, I look for three things with this setup:

 

  • The stock experiences a massive drop (OSTK plummeted and got sold hard into the end of 2019).
  • The stock finds support and holds (OSTK held around $7).
  • The stock to catch a small bounce.

 

When you look at the daily chart above, OSTK satisfied all three conditions, and that was a signal the stock could catch a bounce.

I got in OSTK after it caught a massive bounce to kick off the first full week of January 2020.

 

 

I was chasing a little because I was stubborn the other day, and waited for the right price. However, I couldn’t ignore the price action, so I decided to get in. I wasn’t looking for a massive winner, just 5-10%. The thing is, OSTK had massive upside potential, and it could’ve been good for a 20%+ winner.

Here’s a look at what happened with OSTK.

 

 

The stock hit a high of $8.83 that day… and I sold when the stock gained some momentum. I locked in about 10% overnight, a $9,000 profit overnight! I didn’t want to get greedy, so I sold ¾ of my position, and let the rest ride.

 


Now, for the rest of my position, I actually put a stop-market order. That way, I was able to protect my profits, just in case OSTK turned.

Well, my order got hit at $8.50 on the remaining shares, so I still came out on top with about a 10% winner overall.

 

 

That was good for approximately $12,000 overnight!

In this market environment, small-caps is where it’s at… especially when you can lock down 10%+ winners overnight. Not only that, but you don’t really have to worry about all the political headlines because these stocks move to the beat of their own drum.

If you want to learn how I use 2 simple wealth patterns to consistently find winners in any market environment, click here to below to watch this training session.

 

 

 

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of RagingBull.com and the RagingBull.com Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.

After a strong fourth quarter and Santa Claus rally, stocks kicked off 2020 with a bit of whiplash.

Bulls were shaken up a bit to start the year, after President Donald Trump ordered the assassination of a top Iranian general.

Iran then threatened “harsh revenge.”

The news fueled concerns about oil supplies from the Middle East, sending crude prices skyrocketing.

In addition, gold prices got a boost—hitting seven year highs…  as geopolitical fears had traders seeking safety in tangible assets.

 

 

However, as I told my paid Weekly Windfalls subscribers earlier this week — one thing I’ve learned in 10 years of trading is it can get very, very costly trying to predict the top of a market.

So, while I’m mindful of these overbought conditions — and I still think we’ll see the end of this 11-year bull run sooner rather than later — I’d like to go over three things I’ve learned about positioning during unpredictable markets.

 

1) How to Balance Your Portfolio

 

As I’ve said before, once overall market sentiment is decided — to the bullish or bearish side — weight your trades accordingly.

That is, I prefer to weight 70% of the positions to go along with market sentiment, and the other 30% as contrarian trades, to reduce exposure to unexpected volatility.

So right now, I’m aiming to have 70% of my Weekly Windfalls trades on the bullish side — selling bull put spreads on strong stocks or stocks with firm support in place.

For instance, on Friday, Jan. 3, I let my premium subscribers know that Beyond Meat (BYND) looked ripe for a bullish trade.

The stock was diverging from the market, which indicated BYND was poised to squeeze.

 


With the shares trading around $75.89, I initiated a bull put spread.

That means I:

 

  • Sold the weekly 1/17 76-strike put, as I expected BYND to move and stay above $76 in the short term
  • Bought “options insurance” by purchasing the weekly 1/17 73-strike put, which would limit losses in the event BYND turned lower and breached $73


Subtracting the premium I paid for the lower-strike, out-of-the-money (OTM) put from the premium I received from selling the 76-strike put, my spread was established for a net credit of $1.35, or $13,500 total (since I trade 100 contracts and each contract controls 100 shares of BYND).

 

 

Then, on Tuesday, Jan. 7, BYND had jumped above $77.25, thanks to a nice 4% bounce!

As such,
I booked a cool $2,800 windfall — in less than three sessions!

And I wasn’t the only one, as you can see from this nice subscriber message… (Thanks, Craig!)

 

The other 30% of my Weekly Windfalls trades are on the bearish side — selling bear call spreads on weaker stocks or securities facing off against stern resistance.

I’ve found that when there’s an unexpected crash, as long as 30% of my portfolio is bearish, I can hang in there, because the strong stocks usually rebound.

To put on a bear call spread, you would:

 

  • Sell a call option that aligns with resistance for the stock
  • Buy a higher-strike call option to protect against losses, should the shares rally


The premium you receive for the vertical call spread represents the
most you can possibly make on the trade, and requires the underlying stock to move and/or stay below the sold call strike through expiration.

Of course, you don’t have to wait until expiration to close out your spreads — you can take profits or cut losses anytime.

Speaking of losses, the maximum risk on a bear call spread — and a bull put spread, for that matter — is calculated by subtracting the net credit from the difference between your sold and bought strikes.

So, if you implemented a spread at the 100 and 103 strikes for a net credit of $1.25, your risk would be $1.75 ([103 – 100] – $1.25).

 

 

2) Make the Next Best Decision When Caught Off-Guard


We all have losing trades, guys and gals. It’s part of the game.

But as I’ve said several times, whenever you’re pushed down in life, you have to dust yourself off and learn from your mistakes.

One thing I’ve learned from dealing with unexpected volatility over the past decade: Shake off your losses and go at it again.

That means when I have a losing trade during a roller-coaster market, I’ll often PUT ON THE SAME TRADE FURTHER OUT IN TIME, which usually offsets the losing trade — especially when it comes to selling puts on typically strong stocks.

For instance, a few months back, I was taken by surprise when two of my positions were assigned and I suffered the maximum loss.

However, I still liked those trade setups.

So, after an easy, breezy 10-mile jog to clear my head, I made the next best decision for me: I sold more puts on those same two stocks, using options 1-2 weeks out, because probability was still in my favor to win big.

By shaking off my losses and extending my trades, I was able to bank NEARLY $70,000 in TWO SESSIONS — more than enough to offset my initial losses.

 

 

3) Sink Your Teeth Into Juicy Premiums


When the stock market is volatile, or when traders are expecting volatility,
implied volatility (IV) tends to run hotter.

The Cboe Volatility Index (VIX) reflects Wall Street’s short-term volatility expectations for the S&P 500 Index (SPX), and this week touched its highest point since mid-December.

The VIX tends to rise when Wall Street is anxious, which is why many call it the “fear index.”

However, inflated IVs can be a boon for premium sellers like me, especially when you sell pretty close to in the money (ITM).

Of course, I target sold strikes that are pretty close to ITM because I believe my skill in selecting the right stocks and market direction will prevail, and I’ve been perfecting my chart analysis game for about 10 years over at Jason Bond Picks.

But by capturing those juicy premiums, I’m also assuming more risk.

That’s because ITM options are more likely to stay ITM compared to OTM or at-the-money (ATM) options — and premium sellers don’t want their options to stay ITM.

We want to capture that fat premium by selling the options, then watch it whittle down as the contract moves OTM, and ultimately close our position.

Nevertheless, if you are risk-averse, you can still put on similar trades and grab some healthy premium when IVs are high — you just have to be nimble and make some adjustments.

 

For example, let’s say Stock XYZ is trading around $446, and I expect it to go lower. Plus, IVs are high, which means a higher potential profit for option sellers.

I go aggressive with my trade, selling the ITM 445-strike call for $17, and then hedging by buying the 450-strike call for $14.70, resulting in a net credit (aka – max reward) of $2.30 and a max risk of $2.70.

The probability of the 445-strike call expiring ITM is about 46.3%, so the odds are just slightly in my favor.

Breakeven on the trade is $447.30 (sold call strike + net credit).

Now, let’s say you also want in on the action, but prefer more favorable odds and don’t want to risk getting assigned.

By simply adjusting your strikes, you can boost your odds of a winning trade — but you’ll also have to sacrifice some potential reward.

 

For instance, in the same options series — with roughly two weeks to expiration — you could sell the 450-strike calls and buy the 455-strike calls for a net credit of $1.40 — the most you could possibly make.

Theoretical risk is higher here, at $3.60 (5-point difference between strikes, minus $1.40 net credit), but the odds of the sold 450-strike calls finishing ITM are much less, at around 40%, per a simulated trade on ThinkorSwim.

That’s good for you.

Breakeven is also higher than my trade, at $451.40.

Also favorable.

So, by being more conservative with your strikes, you’re giving up potential profits, and possibly assuming a higher risk, but the probability for a winning trade is also greater.

Another way to reduce risk is to narrow the gap between your sold and bought strikes, if at all possible. (It just depends on the specific stock.)

So, you could sell the 450-strike calls and buy the 452.50-strike calls for a credit of just 80 cents on the spread, with a maximum risk of $1.70. Breakeven would be $450.80.

 

In conclusion, guys and gals, don’t let unexpected market tremors keep you from trading.

The beauty of options is you can profit in ANY market environment — you just have to know how to be nimble and pivot.

Sign up for Weekly Windfalls today, and watch how I use the “casino strategy” to bank big winners in just days.

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of RagingBull.com and the RagingBull.com Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.

After a notable Santa Claus rally, the stock market has been rocky the past couple of days, after the U.S. took out a top Iranian general.

In response, Iran said it will no longer heed the uranium enrichment limits set by a 2015 nuclear agreement.

The tense geopolitical climate has bolstered the price of gold — considered a “safe haven” asset during rocky times — and concerns about oil supplies have boosted the price of crude.

While a Wall Street retreat would be a boon to my new Smoke Signals service, which focuses on making money when stocks trade lower, there is still money to be made on the upside!

So today, I want to dive into one technical indicator that helps you hunt stocks on the verge of a possible bullish breakout… and look at an oil stock flashing a buy signal.

 

The Ascending Triangle

 

I recently illustrated how I use the descending triangle pattern to stalk potential bearish trades.

On the flip side, the ascending triangle is a pattern that typically precedes a move higher for a stock or exchange-traded fund (ETF).

There are three things I look for to identify this pattern:

  • The shares are already in a longer-term uptrend
  • A “ceiling” of resistance
  • A series of higher lows

The resistance line and the line connecting higher lows should be able to connect at some point, forming an acute angle (like a triangle!).

Once the stock tops that line of resistance, it typically resumes the longer-term uptrend, making this a bullish pattern.

But, as usual, I like to teach with visuals…

Oil Stock Hinting at a Breakout

 

Wall Street is expecting the U.S.-Iran tensions to weigh on oil supplies, which makes the cost of crude more expensive (due to basic supply/demand economics).

Several oil-and-gas stocks have risen with black gold prices, including ConocoPhillips (COP).

As you can see on the chart below, COP stock has been making higher lows since late August, with a line of resistance emerging in the $63-$64 area.

COP recently broke north of that region, and is now testing territory not charted since April.

 

 

The one thing that makes this pattern less certain, however, is that ConocoPhillips shares haven’t been in a longer-term uptrend.

The stock was in rally mode from early 2016 to its October 2018 peak, but since then has retraced much of those gains.

In fact, the pullback to around $50 in August represented a 61.8% Fibonacci retracement of the aforementioned rally.

If this pattern persists, COP could find another potential ceiling in the $69 region. This area represents a 23.6% Fibonacci retracement of that rally, and acted as a lid for the oil stock in early 2019.

But with the security currently trading around $66, there’s some wiggle room before that potential roadblock is hit. And the $63-$64 area that was the “ceiling” on the triangle above could now switch roles to act as support for COP.

 

A Hypothetical “Casino Play” on COP

 

Now, I’m not saying I’m putting on an actual COP trade in Weekly Windfalls, but I’d like to break down my thought process if I were putting on the trade, for educational purposes.

For those of you who don’t yet know, paid subscribers to Weekly Windfalls are treated to several trades per week, all of which are based on the “casino strategy.”

The vertical credit spread is called the “casino strategy” because of the high rate of success — it tends to make money about 70% of the time!

That’s because it can profit one of three ways:

  • If the stock moves in the anticipated direction
  • If the stock stays stagnant
  • If the stock moves slightly against you

That said, let’s take a look at an example using COP.

Since we feel the stock has some room to run before hitting potential resistance, and since COP just made an ascending triangle on the charts, we would put on a bull put spread.

 

 

To do this, we would first want to sell a put option that aligns with possible support — so somewhere in the $64-$65 area, which marks the baseline of that triangle.

We could sell the weekly 1/24 65-strike put for the bid price of 68 cents.

Then, because we don’t want to face SERIOUS losses in the event of a pullback, we could buy “options insurance” by purchasing the weekly 1/24 63-strike put for the ask price of 31 cents.

Subtracting the 31 cents paid for the lower-strike put from the 68 cents received for the higher-strike put, our vertical spread would be established for a net credit of 37 cents.

That’s the MOST we could make on the trade, assuming COP stock stays above our sold put strike of $65 in the short term (or at least before expiration on Friday, Jan. 24).

Should the stock make a SERIOUS U-turn and move back below $63 — our bought put strike — within the options’ lifetime, the most we could lose is $1.63 (2-point difference between sold and bought strikes, minus 37-cent credit).

To me, that risk/reward ratio isn’t too enticing.

We could get more aggressive with our strikes, selling the at-the-money 66-strike put for $1.02, and buying the 64-strike put for 49 cents.

However, that would mean we’re trying to get 53 cents ($1.02 – $0.49) by risking $1.47 (2-point difference between strikes, minus 53 cents).


Not much better.

Typically with my credit spreads, I aim for a tighter risk/reward backdrop — like risking $1.30 to make $1.20.

Or, like with my recent Alibaba (BABA) trade, I risked $1.50 — or $15,000, since I trade 100 contracts at a time, and each option controls 100 shares — to make $1, or $10,000.

That trade worked out nicely, with paid Weekly Windfalls members watching me make a cool $5K in UNDER THREE SESSIONS!

Upgrade your subscription today, and get in on the next quick-and-dirty win before it’s too late!

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of RagingBull.com and the RagingBull.com Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.