An interesting day in the market today. Wall Street faked a lot of people out with the early selloff. That got plenty of traders betting on the downside before they yanked out the rug.
However, tech savy traders and investors used it as an opportunity to pick up some directional call bets and grab some extra cash. Looking at the big boards, Wall Street seems to have loaded up on Boeing Co (NYSE:BA), Abbott Laboratories (NYSE:ABT), Alphabet Inc Class A (NASDAQ:GOOGL), Smartsheet Inc (NYSE:SMAR) calls while those with short positions in AAPL and SPY were caught pants down !
This market just looks unstoppable for a while, so I am going to lean towards betting on more of a move higher than I will on a move lower. Look at it this way – the VIX went from up 10% to down now over the course of the morning. That tells me stocks want to rally here.
Bonds continue to remain lackluster, while gold is seeing a slight pullback. Crude oil is interesting as it trades sideways between $23-$26. I have a feeling it’s about to take off soon as bullishness envelops the market.
So is this the start of the last hurrah or are we beginning a new bull market?
There’s a lot of evidence that suggests either could be true. I’m like most investors out there – I simply don’t have enough information. Right now, stocks are trading higher on the hope/expectation that we reopen the economy and continue forward. They aren’t discounting a second wave or any other bad news.
Whether that’s reasonable or not isn’t relevant. We get to trade the market we have not the one we want.
With implied volatility coming in, straight option plays are becoming cheaper. You’ll see me start to take advantage of that with a few day trades and swing trades. This will make up a larger portion of the trades than credit spreads for the near future.
As volatility contracts on some of the most beaten down names (IE airlines), I expect there to be big opportunities if I can time them right. However, these stocks still have high IV, so as they climb higher, IV decreases. That means call options face an additional headwind.
Still, there’s a lot of bullish sentiment and trends out there. For right now, I’m riding the gravy train until it stops.