John Nazarene to CNBC. further spoken mid-term report His thoughts on today’s market rally, including three unusual trading ideas for options activity.
Buy Bounce or Sell Rally?
When asked if he “bought the boom” in the market today, John said the following:
“Our technical analyst AJ Monte thinks we will continue to see lower levels. During its weekly market report last week, AJ said, “We’re going to rally sometime next week and it’s selling.” Is.”
Inside the Rebel Hub of Market Rebellion Check out AJ Monte’s weekly market report
In short: techies don’t support it. But what about the underlying metrics of the options market?
“Pete and I are talking Crowd, instabilityand speed – and to this day we do not see this “volume”. For a change, we need to see higher volumes on a daily basis. I mean, today, in the middle of the session, we’re looking at about 20 million options trades. The annual average for a full day is 41 million – we’re halfway there. I don’t know if we’re ever going to be average or not.
Last week when we had a big rally with the Fed’s move on Wednesday and we said ‘it’s going to explode the next day’ – that was it. And that was 30-36 million contracts that day. I think we have to see something in the 45-50 million range on the day of a rally to say, ‘okay, now you’ve got the shorts’, but right now you don’t.
John summed it up,
“I don’t think we’ll get more than one tag [out of this rally]I don’t believe that speed depends on quantity.”
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In summary:John doesn’t shop here all, and he doesn’t think the market is out of the woods. But that doesn’t mean he lives on jitters — and neither do you.
John discusses the three ways to trade the market in his section on unusual options activity.
Call for US Global Jets ETF (JETS).
John’s first was in business (jet) – Get the US Global Jets ETF report which observed unusual options activity on the $18 strike call expiring September 2021. Trading: 17,900 calls were bought for between $1.12 and $1.16 with the Jets ETF trading at $16.92. Airlines caught a bit of respite last week as the price of “Jet A-Type” fuel fell sharply – a tailwind for the travel business. Add to that the demand for travel continues to grow, and it’s easy to see why anyone would trade those calls.
Cenovas Energy (CVE) call spread.
John’s second trade was natural gas stock Cenovas Energy (Cenovas Energy).CVE) – Get reports from Cenovus Energy Inc. Again, this was a bullish trade, except it had an even shorter time horizon – the July 15th expiration. The buyer collected 10,000 of the $21 strike calls at $0.90 each and hedged this by selling 10,000 of the $23 strike calls for between $0.32 and $0.33 per contract – a net debit of between 0.57 $ and $0.58.
This trader chose to use the vertical debit spread for this particular trade. If you want to learn more about vertical spreads, read last week’s article Debit or Credit: Which Vertical Spread is Right for You?
Like many energy stocks, the stock has been in a strong uptrend in 2022. Despite recent bearish price action in the energy sector, CVE is still up over 58%. With strong supply and demand dynamics showing no signs of giving up, the June pullback proved a perfect entry point for this institution.
iShares High Yield Corporate Bond ETF (HYG) Puts
It can’t all be sunshine. Indeed, as the market moves up, John sees a huge bearish trade (HYG) – Get the iShares iBoxx $ High Yield Corporate Bond ETF report. Looking ahead to September, one buyer added 100,000 Paying $1.01 per contract from a $68 strike put.
“High yield” is essentially a euphemism for low quality credit. This buyer believes the market is at high risk of default. It’s a trend we’ve already started hearing from Ford, and John Nazarian thinks we’ll be hearing from other companies in the future. When we start hearing about bankruptcies and defaults increasing, HYG and low quality lending will be in full swing.
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