Note from Ashley Cassell, Managing Editor, TradeSmith Daily: We’re living in the age of “overnight risk”… That’s when some big, morning headline moves the market dramatically right out of the gate. You never want to be on the wrong side of these moves. But if you’re married to the buy-and-hold trade, there’s no avoiding it. Jonathan Rose, founder of Masters in Trading and short-term options expert, offers up a solution. Jonathan, being a former Chicago Board Options Exchange (CBOE) market maker, knows how to leverage these big, sudden moves without needing to know which way they’ll go. In other words, with this strategy, the risk of being caught on the “wrong side” drops to the floor. Jonathan walked you through a specific example in his One-Day Winners webinar on Tuesday; if you missed it, click here to watch the replay. The webinar takes you step-by-step through how Jonathan deploys Masters in Trading’s newest tool, V.I.T.A.L., to view the data market makers use to “take the temperature” of the market. And read on to hear how to manage overnight risk, grab gains from the options market quickly, and stop losing sleep over your positions in the process. |
How to Trade One-Day Market Movers BY JONATHAN ROSE, FOUNDER, MASTERS IN TRADING Within a few days of Donald Trump’s election victory – and with a market-beating third quarter in the books – Tesla (TSLA) stock suddenly surged by more than $100. As many of us probably know, Tesla CEO Elon Musk was one of Trump’s top donors, dedicating at least $118 million through his firm SpaceX and millions more through his own PAC. Musk isn’t the only Trump donor who’s capitalized on the market’s recent climb… Just take a look at the surge in energy stocks over the last few weeks. Clean energy companies have absolutely tumbled since Trump’s election victory, sparking a wind and solar sell-off in the immediate aftermath. But legacy energy players like ExxonMobil rallied in the days after the election based on a strong belief that a Trump administration would be easier on fossil fuels… Significantly, major players from Energy Transfer to Liberty Energy have contributed a haul of more than $34 million in donations to Trump’s campaign. Of course, these are just a couple of examples of how the markets are rewarding industries that investors think Trump will favor. And anyone who invested through those intraday moves had the chance to quickly take gains on a handful of stocks. Those gains are gone for us now… But that doesn’t mean the markets are suddenly in retreat. There’s one major takeaway I want to leave you with here – The stock market’s momentum won’t let up anytime soon. If we take a wider view on equities, we’ll see that this post-election stock boom is no mere fluke… It’s really part of a longer uptrend in the stock market that we all need to pay attention to. Consider how all the major indexes have performed before and after the election… The Russell 2000 – one of the largest small-cap indexes I follow – surged 14% in the week following the election, and it’s now up over 30% for the year. Ever since November 5th, the S&P 500 is up about 23% for the year… and a whopping 65% since November 2020. All of the major global indexes are searching for higher highs from here… And I believe options traders have the market beat when it comes to capturing the biggest gains the markets can offer. That’s why I’m interested in showing you one of the options market’s best-kept secrets… One that institutional traders have relied on over the last four years to capture truly unprecedented gains. And it all starts with discovering where the biggest and most unusual options trades are trending in the stock market right now. Looking Beyond the Post-Election Stock Boom The VIX Term Structure (VIX) – my volatility crystal ball, so to speak – is a tool used by the Chicago Board Options Exchange (CBOE) that shows the expected S&P 500 Index volatilities based on options that hold different times to maturity. It essentially allows us to take the temperature of the stock market and see where near-term and long-term volatility sit in the markets. Now, long-term volatility is an interesting case. It’s ticking lower as I write to you, with a more stable market outlook following the election finally bringing some certainty to the markets. But if we consider the near term, we can see a large spike in this fear gauge, with short-term risk bouncing higher just before the big day and right after… As it stands, even days after the election, all the VIX short-term indices are running higher. All of this tells us something very powerful about the stock market right now – short-term volatility isn’t going away any time soon. And when short-term volatility is elevated, that gives us the opportunity to quickly execute options trades that can capture unprecedented gains. That’s where a key tool I like to use comes in. It’s what I call the Unusual Options Activity (UOA) Tool, and it’s designed to track and quantify unusual options market activity for individual stocks. This tool combines various factors – from volume and open interest to changes in implied volatility – to find those stocks that are making potentially market-making moves. By using this tool – and looking at all the sectors that will likely benefit from a Trump administration – we can discover some of the most potentially lucrative trades hiding in plain sight. One major area of focus right now is nuclear energy. As the world gradually moves away from fossil fuels, the use of nuclear power is expected to grow exponentially. And with all the investment and speculation flying around nuclear power, there’s a lot of bullish options trading volume lifting industry players like NuScale Power Corp. (SMR) and Centrus Energy Corp. (LEU) as I write to you. Even if you’re not interested in playing these stocks outright, there are great ways to play any positive beats in nuclear by trading options on funds like the VanEck Uranium and Nuclear ETF (NLR). We can also look at precious metals like steel for a clue. Steel stocks like United States Steel Corp. (X), Steel Dynamics, Inc. (STLD), and Cleveland-Cliffs Inc. (CLF) are seeing a ton of options trading after the election. It’s no surprise. Domestic manufacturing is a huge priority for the incoming administration, and Wall Street anticipates more policies to shore up stateside steel companies in the long term. These are just some of the sectors where we can anticipate seeing strong gains over the coming months. My UOA tool is also showing strong options trading volume around a whole range of other sectors expected to see positive policies and investment over the next year – everything from digital assets and semiconductors to commodities and transportation. My readers already get access to the suite of tools I use to discover these amazing opportunities in the stock market… And if you’re reading this right now, I want you to be able to get the same insights they do to capitalize on this unprecedented moment in the stock market. For months, I’ve been preparing my readers for the type of widespread market volatility we’re seeing right now. And I don’t think normal stock plays are on the table for investors looking to capture the biggest gains the markets can hand us… The Next Step in the Trump Stock Surge For any traders looking to maximize their gain potential, it all comes down to a specific asset class that I like to call Wall Street’s “best-kept secret.” You see, over the last four years… in a market wracked by rampant volatility… the most successful institutional traders have all been maximizing their gains using a type of quick options trade that’s simply not on the radar for most traders. It’s called an 0DTE trade – or zero days to expiration. These are stunning options plays that allow us to buy an option today that expires before the end of the trading session. These quick options plays don’t require us to put up massive amounts of capital to maximize our gain potential… and they’re the perfect tool for allowing anyone to profit from intraday price movements while market volatility remains at a fever pitch. Additionally, there are options that expire within 1 to 3 days – known as 1DTE, 2DTE, or 3DTE options – giving you a slightly longer window to execute your trades while keeping your risk exposure low. By hedging your short-term risk and piling into trades at the right time, you can find some of the most powerful opportunities for gains in the stock market. And the historical trajectory of the stocks bears all this out. I’ve just recently put together a special presentation, One-Day Winners, that will clue you in to the strategies I use to find these market-making trades. Time is short, and I really don’t want you to miss out on a proven system that could net you gains as high as 155%… and even one 279% gain… all while the markets are turning higher. Simply click here so I can walk you through my unique system by showing you a real example of one of these trades. Remember, the creative trader wins. Jonathan Rose
Founder, Masters in Trading
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