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Market Is Strong - Here’s How To Day Trade SPY Options Today [Video]

Posted by Pete Stolcers on January 24

Posted 9:30 AM ET – Yesterday the market gapped lower and it searched for a bid. After confirming support, buyers stepped in. Profit taking only lasted a day and the market closed on its high forming a bullish hammer on a daily chart. We are seeing follow-through buying this morning and the S&P 500 is up eight points before the open. Strong earnings from Intel (INTC) are providing a solid backdrop. We will be doing some option lottery trades today in the chat room using weekly options that expire today.

Yesterday the WHO was reluctant to label the Coronavirus as an international epidemic and the market liked that news. The virus is spreading and we need to watch this very carefully. China has prevented travel for 40 million citizens on the eve of the Chinese New Year. The death toll is rising and there are new cases in other countries. At this stage, the virus is not a concern for the market. However, this is the type of “surprise event” that could impact economic growth and that could spark profit-taking.

Without question, bullish speculation is extremely high and many traders are vulnerable. A shock could send them scrambling and we have seen this before (Ebola).

Economic data points were very good overnight. Flash PMIs from Europe and Japan were better-than-expected. Domestic numbers will be posted 15 minutes after the open this morning and they should be market friendly.

President Trump will sign the USMCA next Wednesday.

Earnings season has been excellent so far and most stocks have been able to tread water. Earnings announcements will kick into high gear next week and we will see if there is still some “gas in the tank”. Amazon, Apple, Facebook, Google and Microsoft account for 18% of the S&P 500 and these earnings reactions will determine market momentum. I’m not looking for a major pullback, but I do believe that we will see a fairly stiff headwind with valuations at the upper end of their range (forward P/E of 18).

Swing traders should start selling out of the money bullish put spreads on stocks that pullback after announcing excellent results. Netflix was a classic example of how the initial reaction is not always an accurate reflection of what the stock will do. It sold off after the earnings release Wednesday and yesterday it rallied above the prior day high forming a massive bullish engulfing pattern. This stock was picked up early by Option Stalker searches and we captured the move. This is exactly the type of pattern we will be looking for in the next month. Stocks that initially pullback on the release and then shoot higher will be excellent bullish put spread candidates. By the way, I like this breakout on Netflix and I like selling out of the money bullish put spreads on it. I will be highlighting these stocks in the chat room and in my daily videos. Heavy Buying, PopBull, Strong After Earnings and After Earnings Bull are your go to searches. Wait for the earnings releases and sell bullish put spreads below support. If the market goes sideways as I expect this option strategy will allow us to distance ourselves from the action and we will take advantage of time decay. I like selling bullish put spreads that expire in three weeks or less because of accelerated option time decay. This also allows me to keep rolling my capital into new trades with earnings releases. Bullish put spreads are a great option trading strategy in this environment. They generate income while the market consolidates recent gains.


HOW TO DAY TRADE SPY OPTIONS – 3 STOCKS TO WATCH – CLICK HERE

Day traders should wait for the bid to be tested early this morning. I posted a YouTube video last night and it details my day trading strategy for SPY and my day trading strategy for S&P 500 futures. Please make sure to watch that. Wait for the bid to be tested this morning and look for opportunities to get long. The overnight economic news and earnings news was good. We have a good market tailwind and I will be looking for option lottery trades later today. When I buy option lotto’s I wait until the last hour of trading and I buy options that will be expiring today. Obviously, I will be looking for bullish stocks today with strong momentum. I buy at the money call options that have a very high likelihood of going in the money before the close and I buy them for pennies. When the stock goes in the money these options fly. They have to trade at intrinsic value so the Market Makers can’t play games with the price. I also have a number of YouTube videos for this options strategy. Favor the long side today and use smaller size if you short.

The market is likely to make another all-time high today.
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