Buying The Dip
We got some bad new yesterday, driving down the market, and as usual, that exposed a few opportunities. We took advantage of one on Friday, and have two more tee'd up for Monday.
Friday's Bargain
One strategy that’s had some success for us in the past, is placing bullish options trades on Portfolio Armor’s top names after a market dip. That’s what we did on Friday.
In addition to being one of our top ten names on Thursday night, Friday’s stock had a valuation rating of 9 according to Chartmill—offhand, I’m not sure if I’ve seen that before, but it’s certainly rare. Our top names tend not to be cheap.
We placed two trades on this one on Friday:
A short term, speculative trade expiring at the end of next week. The maximum upside on this one is uncapped, and the maximum loss is 100%.
A medium term trade expiring after its next earnings report in April. The max upside on this one is about 220%, and the max loss is 100%.
What We Have Tee'd Up For Monday
Two more stocks caught my eye after Friday’s market selloff. Both are names we traded last year, but here’s where they stand now:
Stock #1
Beat on top and bottom lines last quarter.
Down more than 30% YTD.
Chartmill valuation rating of 9 out of 10.
RSI (Relative Strength Index) of 24 on Friday (readings below 30 are generally considered oversold).
Stock #2
Beat on top and bottom lines last quarter.
Down more than 20% YTD.
Chartmill valuation rating of 7.
RSI of 26.
For Stock #1, the options market expects a movement of 15% in either direction after it reports earnings again next month. We’re betting on the stock climbing 11% or more. If we’re right, our maximum upside will be about 300%; if we’re wrong, our maximum loss will be 100%.
For Stock #2, the options market expects a movement of about 28% in either direction. We’re betting on a gain of about 19%. If we’re right, our maximum upside will be about 300% again; if we’re wrong, we could lose 100%.
If you would like a heads up when we enter our next trade, you can sign up to our trading Substack/occasional email list below. And if you want to add some downside protection here, you can download the Portfolio Armor optimal hedging app by aiming your iPhone camera at the QR code below (or by tapping here, if you're reading this on your phone).
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