Good morning, Power Profit Traders!
Don’t forget to watch me LIVE at the open at 9:30 a.m. ET right here — we have much to discuss this morning!
In the meantime, indulge me as I channel my inner English professor.
Dictionary.com defines “Serendipity” as “an aptitude for making desirable discoveries by accident.”
In other words, it’s when you stumble into some good luck.
Now, most of the time, trading successfully comes from something cerebral…
Perhaps you’re executing trades based on a particular pattern (you know I love my patterns!), seasonality trends (love those too!), or good old-fashioned research (why I’ve been SCREAMING about the opportunities in the crypto world lately).
But every now and again, you practically trip over a serendipitous trade laid at your feet by the Gods of Wall Street.
That’s exactly what happened as I was diving into today’s Power Profit Trades Watchlist.
In fact, one of the stocks on our Watchlist checks off TWO BOXES for a potential bullish trade… and it’s a trade idea I wasn’t even hunting to begin with.
So today, I want to show you how using my Morning Report tool in the TG Suite app (instructions on how to use and download found here) — free to my Power Profit Traders — can be a jumping-off point for your OWN trade ideas.
And hey, even when you don’t know what you’re looking for, you never know when serendipity will strike.
Serendipity Isn’t Just for John Cusack
Today’s Watchlist is based on the Morning Report’s Cheap IV tool — accessible to you for free by following these steps to download and use the TG Suite app.
This data is updated after the closing bell each session, and compares current implied volatility (IV) against a set of near-the-money options over the last year.
Unlike other indicators around the web, the Morning Report’s Cheap IV tool compares IV against itself, as opposed to historical volatility (HV), for a more apples-to-apples comparison.
“Cheap IV” means the current IV is at the low end of this 52-week range, indicating option premiums are relatively inexpensive at the moment – a ripe atmosphere for buying to open calls or puts.
That said, drybulk shipping concern
Textainer Group Holdings Limited (TGH) emerged as the No. 1 stock on today’s Watchlist, with current IV at a 52-week low following a
post-earnings volatility crush.
Of course, finding a stock on the Cheap IV list after an earnings report is no surprise.
But what I did find surprising is that while TGH’s IV is at an annual low, TGH’s share price is nearing an annual high, per data from TomsTradingTools.com.
This combo — rock-bottom option prices + shares flirting with new highs — can be a one-two punch for wannabe call buyers.
In fact, William J. O’Neil, the founder of Investor’s Business Daily, brought this strategy to folks’ attention years ago, and it’s still one I like today.
Stocks that are at or near their 12-month highs are there for a reason (or for many reasons), and when near-the-money options IV is near a 12-month low, the theory is buying call options allows you to speculate on even more upside for relatively minimal risk.
That’s because when you buy a call, the most you’re risking is the initial premium paid for the option.
If the stock moves against you, that premium is all you stand to lose, whereas if the stock’s upward momentum continues, potential gains are theoretically unlimited to the upside.
Relatively low risk + sky-high reward potential? Um… yes, please!
That’s all for now, but remember — while it’s awesome to stumble onto a serendipitous trade idea, those who trade on luck alone don’t trade for long…
Truly successful traders make money moves based on repeatable patterns or well-thought-out research (like the 3G coin craze about to storm the nation!). Sure, all traders fail sometimes, but smart trading decisions, the right guidance (which you can find at my 9:30 a.m. ET LIVE sessions here!), and risk management all contribute to successful traders staying in the game.
See you soon!
Tom Gentile
