Two Simple Trades in a Hectic Market.
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Two Simple Trades in a Hectic Market.

John F. Carter - February 11, 2016

Hey everybody, this is John. Welcome to the free video. So, what are we looking at here? Well, the VIX today had a 30 minute squeeze And it popped up, intraday today. And what that did, even though the markets gapped up, they ended up selling off into the close. And for the weekly and the daily chart, what's interesting right now is that we have a daily squeeze to the downside. But we're also very stretched to the downside, meaning that on a weekly chart, we could get a rally out of the blue, at any time.

So how do you play this? You play this on individual stocks. So let's bring up a 30 minute chart on Priceline (PCLN). And when you see this, and think, "Wow, there's a squeeze setting up. Let's go directional, and see if we can make some money, even though this market's a little shaky." So how did that work? So for PCLN, which was up so much today, over $41, we didn't have to buy many options to end up making $23,385 on the trade.

This is what I call a hit and run, meaning that we're not looking for direction, We're not looking for something to stay in until next year. We literally bought this on Tuesday and sold it on Wednesday. So it's not even a day trade. 3 hours Tuesday and about 4 hours on Wednesday, so we were in the trade for 7 hours total.

So that's what I call an aggressive trade. A more conservative trade is this one. In Gilead (GILD). So we're looking for GILD to go up a little bit, so what we decided to sell a put credit spread. For those who are newer, this is often a confusing term. Think of it this way: We thought GILD, based on our chart analysis and indicators and setups that we look for, would go sideways to higher. We just didn't think it would go down any more.

So, by selling the $86 put at $2.12--and when you sell a put, it gains in value if the stock falls. If the stock doesn't fall, or if it rallies, that put will lose value. Since we sold it to someone else, we get to keep that money. Okay? And we bought the $81 put just in case we were dead wrong. I didn't want to wake up and say, "Wow, GILD is trading at $50, and suddenly we've got all this exposure By buying that $81 put, it severely limits our downside risk, which is great.

So now we're sitting here with another $1,500 in profits, with a total of $5,700 in profits. And we'll probably close this out tomorrow. So those are the main options trades we've looked at over the last couple of days.

Anyway. For those of you newer to options, join us this Saturday! Link below.
Have a great night, and we'll see you at the next update.