CBOE: The Volatility Trade Nobody’s Watching

The recent market pullback has exposed just how dependent the major indexes had become on a narrow group of technology leaders, and their abrupt reversal has sent the Nasdaq into correction territory in a matter of weeks. But heightened volatility can create opportunities beyond the stocks getting caught in the selling, particularly for businesses positioned to benefit from increased market activity. One name attracting attention is CBOE Global Markets (CBOE), which is displaying a Profit Surge Buy signal as its 21-day EMA moves above its 63-day EMA, a bullish crossover that first emerged in mid-October and has continued to strengthen. While much of the market has struggled, CBOE has pushed to fresh multi-month highs and is now within striking distance of its previous 52-week highs, reflecting a notable pocket of relative strength.

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There are a couple of ways to approach this setup, from simply purchasing shares to using call options for greater upside participation with a smaller initial capital commitment. One approach worth considering is a slightly in-the-money CBOE call, which provides exposure to further upside without requiring the same investment as purchasing 100 shares outright. To put the potential into perspective, under the hypothetical option scenario provided, a 10% advance in CBOE by expiration could put the position on pace for a 120.3% profit potential. That outcome is not guaranteed of course, but it illustrates how the right option structure can amplify a relatively modest move in the underlying stock.

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Wishing You the Best in Investing Success,