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“Attention Kmart shoppers! Women’s blouses are 50% off for the next 15 minutes. Look for the flashing blue light!”
You might remember these famous words from Kmart’s Blue Light Special.
Part of the American lexicon in the ’70s and ’80s, the Blue Light Special was an effective sales tool for Kmart.
It worked like this…
At times throughout the day, Kmart would announce a huge discount on a product only valid for 15 minutes. A flashing blue light above the product attracted a crowd.
This kind of noise drew a crowd and for good reason… opportunity!
And the same thing happens every single day in the markets…
You just need to know when to listen…
Play Implied Volatility for a Triple-Digit Gain
For Kmart, opportunity drew crowds and increased demand. And the same can be said for the stock market.
Now, last week we talked about how the VIX is a great market sentiment indicator and predictor of market turning points.
Well, we can do the same exact thing with individual stocks by detecting stocks that are drawing a crowd using options.
You see, when the demand for options on a stock increases, the options get more expensive. We can measure the expense using implied volatility (IV). As the demand for a stock’s options increases, so does IV. As the demand decreases, IV also decreases.
This is commonly seen in stocks that breakout at earnings.
Check out this IV chart for Nordstrom (NYSE: JWN).
Notice how the red line spikes up into earnings (green “E” triangles). Similar to the effects of a blue light special, these are spikes in demand. There’s a crowd around this stock’s options.
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Why?
Traders are drawn to JWN because it tends to gap at earnings as shown below.
Gaps = opportunity and expectant traders are willing to pay a premium for the opportunity.
Opportunity creates crowds and crowds in the trading world move stocks.
Here’s a stock that came on my radar because of a massive volume spike.
On June 14,
Innovative Industrial Properties (NYSE: IIPR) announced it is increasing its quarterly dividend to $0.60 (an annual yield of 2.4%). Great news!
And just like the blue light special, this kind of news draws a crowd. The red spiked IV line is evidence of that. Traders are ravenously snapping up options.
This “Blue Light Special” has had the expected movement on the stock – up!
IIPR is a real estate investment trust providing capital for businesses in the booming medical cannabis field and is on fire.
An above average dividend on a booming industry makes for a good investment proving that now is a good time to jump on the IIPR train!
What’s really cool about this strategy is that it can identify insider information and an imminent move.
It is not uncommon for these IV spikes to occur when the stock is flat. No news is out yet, but demand for the options has spiked. Someone knows something and is buying options. Virtually every time, news will follow a number of days after the spike.
You’re probably asking how you can find these IV spikes.
And I’m sure it’s no surprise when I tell you that I’ve developed a scanner that can pinpoint these moves and help you bear the herd.
In fact, I’ve recruited a team of data scientists, and together we’ve spent many months testing and perfecting what could be the only formula in the world that has the power to hand you a 94% success rate… a 15-to-1 reward-to-risk ratio… and as much as $30k a month in enormous gains… using volatility spikes.
And now, I’m using this formula’s power to monitor the markets and scan for the very best opportunities. Just by zeroing in on one tiny fraction of the market, I’m able to pinpoint winners with 94% accuracy based on our testing.
Make no mistake: what I’m doing here is set to make history. And it begins now, right here, where you have a chance to become one of the first people in the world to experience the massive profit potential delivered by it. Click here to see it in action.
Good Trading,
Tom Gentile
America’s #1 Pattern Trader
