This past weekend I traveled to Wrightsville Beach, North Carolina to compete for a state tennis championship.
Seven guys from the team shared a house for the weekend, and over drinks one night, I was asked what I do for a living.
I told the group of successful businessmen that I trade options.
What followed were many questions on how to buy calls and puts, how to hedge portfolios with options, and my thoughts on Bitcoin.
I was thrilled to share my 18 years of options trading experience with these guys because options education is my passion.
Here is a picture of the team after a match (I’m the guy in the front row who had won early and was already in sandals):
Because I believe options trading should be a part of every investor’s playbook, I love teaching beginner options traders about calls/puts and buy-writes. And it’s extremely exciting to see Cabot Options Traders graduate to Cabot Options Trader Pro, where they learn about Bull Call Spreads, Iron Condors and more. At Cabot Options Trader, education is just one of many services you get.
Here are some examples of what Cabot Options Traders receive:
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Daily Order Flow List and Covered Call Ideas
Every morning, Cabot Options Trader subscribers get my list of the biggest options trades from the previous day—essentially a look into how hedge funds and institutions are positioning their portfolios through the use of options. I also include two covered call/buy-write ideas. Here’s a recent example of my Daily Order Flow morning email.
Bullish Order Flow:
Buyer of 12,500 General Motors (GM) December 46 Calls for $1.06 – Stock at 45.15
Buyer of 36,000 General Motors (GM) March 49 Calls and Sale of 36,000 March 40 Puts – Stock at 45 (big bull risk reversal)
Buyer of 10,000 Micron (MU) January 43/49 Bull Call Spreads and Sale of 10,000 January 36 Puts – Stock at 40.65 (bull risk reversal)
Buyer of 13,000 IntercontinentalExchange (ICE) November 67.5 Calls for $0.90 – Stock at 65.2 (earnings 11/2)
Bearish Order Flow:
Buyer of 3,500 Allergan (AGN) November 180 Puts (exp. 11/3) for $3.40 – Stock at 180 (AGN has fallen hard in the last month – earnings 11/1)
Buyer of 10,000 Oracle (ORCL) January 50 Puts for $1.78 – Stock at 50.25
Covered Call Ideas:
Buy Akamai (AKAM) Stock at 54, Sell November 54 Calls for $1.50
Static Return: 2.85%
Breakeven: 52.5
Covered Call Return (if assigned): 2.85%
Buy GrubHub (GRUB) Stock at 58, Sell November 58 Calls for $1.80
Static Return: 3.20%
Breakeven: 56.2
Covered Call Return (if assigned): 3.20%
Trade Alerts
When I recommend a trade, Cabot Options Traders get an email or text alert with my breakdown on the risks/rewards of initiating the position. Here’s a sample of a recent trade alert:
Buy Union Pacific (UNP) January 120 Calls (exp. 2019) for $8 or less.
On Wednesday, a trader bought 137,500 Union Pacific (UNP) March 130/150 Bull Call Spreads for $0.62. Then, yesterday late afternoon, a trader bought an even bigger position, premium-wise. Here are the details of that trade:
Buyer of 60,000 January 130/160 Bull Call Spreads (exp. 2019) for $3.56 ($21 million in premium at risk)
This longer-term positioning is extremely intriguing to me, and I am going to add UNP to the portfolio.
To execute this trade, you need to:
Buy to Open January 120 Calls (exp. 2019).
The most you can lose on this trade is $800 per call purchased.
While I love the bullish order flow, I do want to note the risks in this trade:
First off, earnings are next Thursday (10/26), and if UNP bombs earnings, our trade could get off to a really bad start. That said, clearly by purchasing options that expire in March of next year and in January 2019, this trader is not targeting next week’s earnings report.
Second, UNP has been recently downgraded by several research firms citing potential challenging volumes in the coal and automotive space.
That said, the bullish order flow feels like a trader taking a shot on potential M&A or on another catalyst. Also, as we will have lost Micron, Bank of America, and Pulte Homes positions this week, we have room in the portfolio for a new position.
Please note that because earnings are coming next week and the trade will eat up capital for quite some time, I am going to allocate a smaller percentage of options capital to this trade. If I typically commit 2%-5% to each trade, I will allocate closer to 2%-3% for this trade.
A couple of days later, we sold half this position for a quick profit of 42% following earnings.
Other Options Trading Perks
My options trading subscribers also receive:
Stocks on Watch: A detailed look at the stocks that are on my radar.
Access to me via email: You can ask me anything and I’ll reply in an hour or less.
Earnings Updates: Details on the outlooks for the biggest stocks reporting earnings the next day.
So even though my tennis team finished second in the state last weekend, I had a great time doing two of the things I like best: playing tennis and sharing my options trading knowledge.
If you would like to learn more about options, click here.
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