Big time complacency... that's what I see in the market at the moment. I have a feeling that we will see a volatility expansion next week, which could make options traders sweat if they do not maintain a healthy BP (buying power) ratio.
So what's my trade for today?
#XLE (#EnergyETF) is near its all-time high so I believe it's time to sell some call options against it. As we can see on the monthly chart below, the price is at $92 and it has never traded higher than $100. What's worth keeping in mind is that if the energy prices are very high then the energy producers produce more to take advantage of the increased profit margins. Because they produce more (supply) eventually the price will come down due to the abundance (demand). This is the basics of free economy: the market is always moving towards the equilibrium, where the supply and the demand is at the same level.
The stats
Trade Type: Short Call
Strike: $100
Expiry: 15 Jul
Delta: -21
IV Rank: 37
Premium: $0.92
Cap Req: $1053
Annualised Prof at Expiry: 84%
IMPORTANT: Studying previous trades provide the opportunity to everyone to learn a great deal so I encourage you to click on the links below and digest the info.
https://www.tycoonitos.com/community/market-comments/market-comments-20220527
https://www.tycoonitos.com/community/market-comments/market-comments-20220603
https://www.tycoonitos.com/community/market-comments/market-comments-20220414
The last link contains a really beautiful journey that shows how a loosing trade can be turned around.
Let me know your thoughts.
What a beautiful winner.
Closed at $0.58 for an annualised profit of 393%.