Options

Options Trade Ideas Based on Sentiment, Volatility & US Elections

Marco Doni Author

October 15, 2020

Options Trade Ideas Based on Sentiment, Volatility & US Elections

Dear traders,

yesterday it seemed that no one had noticed the start of the New Earnings Seasons. What’s going on?

The attention was focused on the stimulus package negotiations and the US election next month.

Another attention grabber was Apple’s new product launch. This article reviews the main highlights of this trading week.

Apple Disappoints but US Stocks Still Holding on

Let’s start with Apple: yesterday Apple’s moves were guided by that market sentiment despite its High Speed product release. These events do not claim the same imagination when they were presented by former founder Steve Jobs. Yesterday’s event was again a disappointment.

Sentiment was helped also by Apple rebounding after a weak performance earlier in the week. In fact 5G capability can’t be totally exploited in the immediate future, an upgrade in 5G carriers networks is necessary.

Now the US stocks: yesterday the US stock market opened higher as a result of positive earnings from banks. We must consider that – as a result of the Fed’s near zero interest rate – income from core lending businesses are dropping. This situation is expected to continue until inflation starts to climb, and especially once it reaches the 2% target.

Conclusion:

For the next few days, without major news, we can expect an up trend continuation with retest of previous high. Today’s (Thursday) pullback should eventually lure in buyers.
But we remain doubtful and skeptical whether price can actually break above the recent tops.

VIX Bullish Angle Offers Bull Call Trade Idea

The Vix has gained some points but is still on his low level around 25.

The increased volatility is also typical for the election period in October and November.

From an Options point of view: it is a good strategy to take advantage of the VIX rise by using a vertical Debit spread on SPY.

Trade idea: the Bull Call 355/360 18 Dec 20 could be an interesting trade, with limited risk.

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