Good morning, Power Profit Traders!
Days like yesterday can really get your inner bull amped up, amirite?
After being in a downward slide for the better part of the past month, a pop higher like we saw Tuesday makes you wonder if we’ve found a bottom and things will be OK again…
After all, that IS what my Money Calendar says has been the trend in recent Octobers.
But what needs to happen now is some follow-through to the upside, to give us a hint of confirmation that the worst is behind us, and that yesterday’s 1%+ pop in the major stock market indices wasn’t a fake-out.
In fact, my long-time trading buddy Jay Harris will be LIVE at 10:30 a.m. ET RIGHT HERE, diving into more exciting Money Calendar fodder for us, and breaking down two approaches to trade management.
And, of course, he’ll be taking your suggestions via chat to hunt a trade setup or two, so make sure you’re in the room!
In the meantime, I want to go over some cheap option-buying ideas, courtesy of today’s Power Profit Trades Watchlist, and talk about a phenomenon you’ll see a lot this earnings season…
Plus, I’ll answer a question I’m asked all the time about cryptocurrency trades.
Today’s Watchlist is based on the Morning Report’s Cheap IV tool — free to all Power Profit Traders!
Catch my video walk-through here
This data compares current implied volatility (IV) against a set of near-the-money options’ IV over the last year. I don’t measure IV against historical volatility (HV), like many other experts — I measure IV against itself.
Cheap IV means the current IV is at the low end of this 52-week range, indicating volatility expectations for the underlying shares are pretty muted compared to the past year.
This typically means option premiums are less expensive than normal on the stock or ETF — often a ripe atmosphere for buying calls or puts.
And regardless of your directional skew, if you’re going to buy options, you want to do so when IV is low — and today’s Power Profit Trades Watchlist is a good hunting ground for long option ideas.
At the top of the list is food distributor
United Natural Foods (UNFI).
While most companies will report their quarterly figures in the coming weeks, United Natural reported early last week, to much fanfare.
UNFI stock skyrocketed more than 20% in a day, as demand picked up from last year’s pandemic-ravaged quarter.
UNFI chart courtesy of TG Suite’s Morning Report tool
Perhaps, then, UNFI options are on the Cheap IV list because of the phenomenon known as a “volatility crush.”
See, IV tends to inflate ahead of a known catalyst like earnings, because these events can (obviously) trigger some wild price swings.
Therefore, an option that’s out of the money (OTM) has a better chance of moving into the money (ITM) after these events, compared to normal, so option buyers are willing to pay up for those premiums.
But once the earnings news is out and the stock swings (or doesn’t), IV deflates rapidly, in what’s known as a volatility crush.
So if you’re looking to buy options on a particular stock and want to do so at a discount, post-earnings is a prime opportunity to get contracts on sale.
Placing a Crypto Order
On Monday during my LIVE 10:30 a.m. ET session, I walked you through the natural gas ETF on my radar, as well as many other things, including answering a question I get a lot:
How do I place an order for cryptocurrencies, like what you trade in your Microcurrency Trader portfolio?
If you couldn’t make the LIVE session, it’s okay — I’ll lay it out for you right here.
The first thing you need to do for ANY trade is to analyze the charts, of course.
And on Monday, I noted that Bitcoin (BTC) recently found support around a 50% retracement of its July lows and September highs.
I said that if we get above and close north of $49,000, we could be back to the BTC races… And if BTC takes out its highs from September in the $53,000 area, look out.
So, what if you want to get into a crypto trade, but you don’t have time to stalk the charts to strike when the iron is hot? Well, just like with options trades,
orders for cryptocurrency trades can be adapted around your specific parameters, if you use an exchange like Coinbase PRO, for instance. (And no, I’m not recommending any specific exchange, this is just an example.)
I walked you through a potential BTC trade during my
LIVE session Monday, showing you how I might put in an order.
In my Coinbase PRO account, under the Order Form, I’d make sure BUY was selected.
From my order choices of MARKET, LIMIT, or STOP, I’d select the latter.
I’d then populate the specific details of where and how much to buy: 1 BTC share for $53,000, in this case, to align with my expectations.
Of course, I understand five-figure bets may not be everyone’s cup of tea, but you could also choose to buy a fraction of a share, to suit your specific risk appetite.
Finally, I would select PLACE BUY ORDER to confirm, after I’ve reviewed the details of my order and the platform fees.
So there you have it,
Power Profit Traders!
For all the cryptocurrency education and trade ideas you can handle, check out Microcurrency Trader…
And if today’s lesson didn’t show you the value of watching these LIVE trading sessions in REAL TIME — like Jay is hosting this morning — well, I don’t know what will.
Have a great day and we’ll talk again soon!
Tom Gentile
America’s #1 Pattern Trader
