Technically, the broader market is still in a downtrend. But that doesn’t mean optimism isn’t bubbling up.
Here are two things that line up to make a potential $1 trade very attractive.
First, you really don’t know that you are at a bottom or a top until it is already behind you. In a perfect world, the reversal is well defined and offers solid confirmation and then continues to move in the new direction. We are definitely not in a perfect world. This means this rally that has started and has offered repeated support could be the turning point. Or it could be another fake out and slam back down. Either way we are at that point where there are enough traders starting to see the potential for things to shift that if you can offer up a long position, you are most likely going to find a buyer.
Take a look at UDOW, a leveraged index ETF that tracks the Dow:
The support is forming as we see high lows testing and confirming support on a new trend line. We also can see that a potential target is the recent high just above 60.
This leads us to the second point that we discussed the other day (see the article here). The potential alone for this to hit 60 means the premium for the 60 call could go up. If you look at the Aug 60 calls for UDOW they are at about $1 this morning. If we see a move up to 55 in UDOW that could make that 60 call spike by 50% or even double. It doesn’t have to hit 60, just move in that direction quick enough to bump up demand for those 60 calls.
Grabbing these kind of option opportunities is a great way to pull income from frustrating markets. If you are looking for more info on how to use options to grab wins from index ETFs, check out Wendy Kirkland’s Smart Paycheck program. Just click here.
Keep learning and trade wisely,
John Boyer
Editor
Market Wealth Daily
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