The Best Setups Now?
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The Best Setups Now?

John F. Carter - March 17, 2016

Hi everybody, this is John. Welcome to the free video. The markets are off and running. Or are they? So let's take a look. The fed came out today. Essentially, it was a lot less hawkish than people were suspecting, and that caused the stock market to ultimately go higher.

It wasn't much of a move, though. Kind of more of a short-covering rally. The real news is gonna happen tomorrow. The one thing that kind of had me a little cautious on it was that the Japanese Yen futures ... I mean, essentially, they look really bullish here. I mean, 90% of the time, the way these correlate, is that if the Yen breaks out to the upside, the stocks sell off. That's been kind of coming apart a little bit, but that's the main thing I was kinda looking at.

I'm not necessarily in the camp of, you know, I don't fight the trend, but we're at a point now where the market's blindly buying the markets up here. It's a little tricky. I certainly don't want to short it, right? So what do we do? What are our options? Well, we just look at stocks here that are just tearing it up.

I love stocks that are near new all-time highs. McDonald's. I haven't eaten at McDonald's in ten years, but that's a stock I like. You know. Starbucks. I'm at Starbucks every day. That looks amazing. Compared to, say, Netflix. Now, could Netflix go higher from here? Of course. But it's got a lot of baggage. And even Amazon, which kind of had some negative news come out near the close, about how it lost, I think, Apple's iCloud business to Google.

So there are some big stocks like that that have taken the NASDAQ higher, that are in a little bit of quiet time right now. At the end of the day, it comes down to setups, and not fighting the action that we have. So what are some trades that I'm looking at?

One thing is that, of course, it's monthly expiration. I do like the idea that with Quadruple Witching that I'm not looking so much for these big explosive moves. I think if we get something like that, it's going to be next week. Now I'm kind of like, all right. We've got to essentially suck the premium out of this market. So I'm just looking for Google, a lot of these stocks, to start trading in a tight range, potentially near some large open interest levels. An example of this would be Netflix. Not looking for some huge move, in this case. Just looking for a move from $99.35 up to $100. The idea with this is that we sold this iron fly, $100 call, $100 put, when Netflix was around $98 bucks, and then if we can kind of grind our way into $100, we mostly make money on that put that we sold. Right? Essentially, we're kind of collecting that premium.

So that's the kind of trading that I'm looking at doing for the rest of the week. We're doing kind of a similar trade here on Google, where the idea is like, you know what? Let's take a little bit of a pause from aggressive directional trades, and focus on just kind of sucking in that premium. In terms of directional trades, this is a trade that I sent out the other day, and I continue like this and even though the markets today had a great rally, you can see that CellGene continues to be under pressure. And I love this squeeze that's setting up. I'm looking for new lows on this. And on this very simple--instead of looking for premium to erode and doing an option that's two days out, we're going into the April options, Give ourselves time for this trade to work out. And then not worry too much about theta decay. Yes, we do have a little bit of a theta decay here. I don't think it's very much. Yeah, $25 a day premium decay. We could offset that by selling some puts, but I'm not so worried about $25 a day, if the direction here proved to unfold fairly quickly.

All right? So that's what we've got going in there, and of course, in the premium video, I'm gonna dive in and talk about all the big moves in gold, in bonds, etc., and we'll take a look at that.

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