It was an epic start for the new month but I would remain very cautious.
Scanning though the headlines I did not see anything that warranted today's tape action so it's probably just a huge volume of short coverings.
What is a short covering?
Short means negative quantity. So when someone says 'I shorted X' then they sold stock X without owning them so on their balance sheet the quantity is negative. When they cover their short position they basically just buy stock X to bring their balance back to 0 or at least closer to it.
The large players, who can really move the market or individual stock, can play this game continuously.
So what's my trade for today?
Today I decided to do something I rarely do: I bought CCL 2025 Jan call option with $7.50 strike. The price of #CCL (#CarnivalCruise) has fallen well below the GFC level for obvious reason. The near term outlook of the company is really bad but if it manages to recover in over 2 years then this trade could be highly lucrative. Because I have a long call position my only risk is the money I spent on the premium.
CCL Monthly Chart
Trade Type: Long Call
Expiry: 17 Jan 2025
IV Rank: 87.3
Cap Req: $310
Annualised Prof at Expiry: ?
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.