The set-up: The biggest event affecting the small-cap market is whether President Trump can get a health-care bill done. Today is when Senate Republicans unveil the text of their take on how to replace ObamaCare, with the real political fireworks coming next week when the vote starts.
Since TrumpCare failed in late March, we’ve heard few details of what could be next. President Trump even called the House version of the bill – unveiled in May – “mean.” Senate Majority Leader Mitch McConnell said on Tuesday that the Senate’s health-care bill will be different, but he didn’t elaborate.
That has left us in a holding pattern while trending slightly higher.
The catalyst: Trump won the election in large measure on promises of reforming health-care and the tax system, and he took a major hit when TrumpCare stalled.
The market is betting that the first failure taught a key lesson, and that Trump will not mess it up twice. If he is smart enough to get this passed – and I think he gets the voites and surprises Wall Street – between now and next Friday, the IWM goes to $145.
My play: I have 500 IWM June 30, 2017 $141 calls, and I hold them at 60 cents. I am essentially saying that by next Friday, I believe the Russell 2000 ETF will hit $141.60 or higher.
The IWM doesn’t have to get all the way to $145 for me; I picked that level based on my technical analysis of the chart, which shows resistance around $141, because I think we break out and head towards $145.
Jason Bond runs JasonBondTraining.com and is a swing trader of small-cap stocks. At the time this was published on RagingBull.com, as described in the article, he held the 500 options on IWM and was planning to trade them as described in the article. He had no additional shares, options or orders in IWM.