Follow Us: TwitterFacebookRSS feed

Bullish Put Spreads Are Still the Best Option Strategy - See This Week’s Picks

Posted by Pete Stolcers on December 23, 2019

Posted 9:30 AM ET – It’s hard to believe, but it is the eve of Christmas Eve. Please excuse the rhyme. I’m a little giddy after a great year and a great decade for the market. We are in the last few days of trading and everyone wants the market to close on a high. Stocks will continue to float higher, but that doesn’t mean that traders should load up.

The news cycle is extremely light and we are in a “sellers boycott”. The Bid is firm and sellers are few and far between. As the market melts up the temptation to take profits will increase.

All of the major uncertainties that casted a dark cloud over the market have recently been resolved. Apart from profit-taking, I don’t see any speed bumps ahead. Stocks are trading at a forward P/E of 18 and that is fairly rich. It will take time for stocks to grow into their current valuations and we can expect some dips at this level.

From a technical perspective the S&P 500 has poked through the upper end of the trading channel on both a daily and a weekly basis. That means that we are likely to see a pullback in the near future. I’m not expecting it until the New Year, but I have reduced my risk exposure. Last week we had a lot of bullish put spreads that expire worthless and our profits “maxed out”. I only have about a quarter of my exposure at this time and I’m not adding. On the next dip bullish speculators will be flushed out and that is when I will be ready to reload, just like we did on December 3rd.

Swing traders should place an order to sell the SPY position at $324. I think we will hit that target this week. It’s okay to have a few bullish put spreads on select stocks, but you need to make sure that they have upward momentum and strong technical support. Keep your powder dry and enjoy the profits we worked so hard for.


CLICK HERE TO SEE THIS WEEK’S BULLISH PUT SPREADS

Day traders need to be cautious. The volume will be extremely light. Look for stocks with heavy volume and relative strength as always. The Option Stalker Heavy Buying search remains a favorite of mine. If you can find two or three good trades, call it a day. Make sure that you like your day trades on a swing basis and consider holding them overnight if the price action is favorable. These little overnight gaps higher will generate nice profits the next day. The key is being in the right stocks.

There isn’t much news to report this week so my comments will be brief. I will post comments tomorrow, but I don’t plan to post them Thursday or Friday.

Keep a small long position on for the next week and take profits before year end. Look for a gradual move higher.

Merry Christmas and Happy Hanukkah!
.
.
image

Get Today's Options Trades Here
OneOption conducts extensive option trading research and it provides specific options trading entry and exit instructions. Select from a spectrum of options trading strategies and find a service that is just right for you. Hedge funds, professional traders and active investors count on OneOption for solid research.

Stock Option Trading Education