Going long on $COST calls before earnings Costco recently introduced their stores over seas which has brought alot of attention to the company recently.
COST trade ideas
THE WEEK AHEAD: COST, GDXJ, IWM, CL1!EARNINGS:
COST (71/29) announces earnings this week, along with THO (89/66), PEP (32/21), and LEN (26/35).
Pictured here is a directionally neutral iron condor camped out around the 14 delta strikes for the shorties paying 1.04 (.52 at 50 max) with break evens at 253.96/316.04, which are slightly wide of one standard deviation. The correspondent short strangle at 215/315 pays 3.74, although you can certainly tighten that up to get a surgical 2x expected move setup at the 260/310, which is paying 5.15.
They're scheduled to announce on Thursday, October 3rd after market close, so look to put on a play in the waning hours of the New York session on Thursday.
Although THO has more ideal volatility metrics, you'll face problems there with 5-wides in the November cycle, and PEP metrics are too low for my tastes to bother with, with 30-day background at 21.
EXCHANGE-TRADED FUNDS
GDX (74/34)
SLV (73/27)
GDXJ (70/38)
GLD (61/15)
TLT (58/15)
XOP (44/41)
I don't know if there's every been a longer period of time in which precious metals have been at the top of the premium stack for such an extended period of time.
GDXJ has the most ideal metrics, with rank >50%, and implied >35%: the November 15th 34/43 delta neutral short strange with the short strikes at the 20 delta's paying 1.22 at the mid.
If you're tired of playing gold, consider a play in XOP: the November 15th 22/23* almost a short straddle short strangle, is paying 2.08.
* -- XOP finished Friday's trading session at 22.51, which is why I'd split the straddle a tad here in the absence of a directional assumption.
BROAD MARKET
Last week saw a bump in volatility, but it still isn't great short to medium term to sell premium in broad market exchange-traded funds.
Running the 10% short straddle test on the highest implied volatility broad market exchange-traded fund -- IWM, shows that you'd have to go all the way out to February (145 days 'til expiration) to get the at-the-money short straddle to pay greater than 10% of the value of the stock; the IWM February 21st 151 short straddle is paying 15.11 versus Friday's closing price of 151.16. Not everyone likes to go out that far out in time, since it takes longer for those types of plays to come in, but would consider something in that cycle if I don't want to play earnings, I have substantial buying power sitting idle, or I'm inclined to a slower, less attention-intensive type of trading.
The IWM February 21st 1 x 2 ratio'd 130/174 short strangle is paying 3.03/1.51 at 50% max, with 1x contracts at the 15 delta on the put side, 2x contracts at the 7 delta on the call side to accommodate skew, with the February 21st 120/130/2x172/2x175 "double double" paying 1.74. Setting up a double double in that expiry is a bit pesky at the moment, since the put side is limited to 5-wides.
FUTURES
/ZF (75/4)
/SI (73/25)
/6B (61/11)
/GC (61/14)
/UB (58/5)
/ZB (58/10)
/ZS (51/22)
/ZN (44/5)
/CL (37/40)
Friskiness in precious metals (/SI, /GC), friskiness in treasuries (/ZF, /UB, /ZB, /ZN), with some volatility left in beans (/ZS) and oil (/CL).
10% Short Straddle Tests:
/SI January 28th 17.5 short straddle: 1.93 versus 17.59.
/CL December 16th 56 short straddle: 7.10 versus 56.18.
I've got /CL setups on in both the November and December cycles, but this implies that it may not be worth initiating premium selling in /CL in the November cycle.
Honorable Mention: /NG (25/44). I pulled the trigger on a UNG play at seasonal lows, after which /NG popped temporarily. It has receded back from mid-September highs around 2.70 and closed Friday around 2.40. Ideally, I'd want in at 2016 lows (<1.75), but that may be asking for a bit much ... .
VIX/VIX DERIVATIVES
VIX ended the week above 17. While an exciting development for short volatility traders, I would keep my pistol in my holster for the time being, waiting for VIX pops to greater than 20 to start legging into bearish assumption positions in either the VIX itself or derivative products like VXX or UVXY.
Costco Long - trend tunnel low pointTaking Costco to the long side. Got to know about the downgrade from Cramer's Mad Money, so thought to do technical analysis.
Cramer suggested buy at this level and technicals are supporting partially.
I prefer to see divergence in RSI but thats not there. So taking this trade by giving more weightage to fundamentals shared by analysts as Costco is least affected by Trade war of all retailers and usually in economic slowdown Costco do well good.
MACD is crossing above red
Target price is 300
Entry price is 288
Risk:Reward is 1:2
Close Up Of Previous Idea and LevelsCOST Ideas are attached, had opportunities to get in and ride this ride on up while everyone else thought it had ran too far too fast. Now sitting at an inner resistance area of its lifetime channel. Break above and hold here then opens up 370's-380's next, knocking on the door of 400. Make sure you look at this chart through the correct lens, and don't just take anyone's word for it that its "overbought" or "exhausted" or "parabolic" and has to come down. It isn't and it doesn't. Congrats if you've been in here a while, or if you bought just a few weeks ago. For now just watch price action around this trend line, and trade accordingly. Happy hunting and GLTA!!
Like I Said, Think Again...As mentioned in previous idea about COST (linked) if you think this has run too far too fast, think again. As mentioned then, the critical level is this inner resistance near 300, which if broken can open the floodgates for COST. If it closes 305 convincingly, this thing can feasibly hit 400 without much trouble. Just because a chart looks straight up in "Auto" charting mode doesn't mean it's overextended. Take another look from the right perspective and things become much clearer. Congrats if you bought then. Happy hunting and GLTA!!
COSTCO hits all time high again.Just like they Big Tech Companies Costco was quick to harness the power of a subscription based business, membership is cheap but the recurring income adds greatly to the bottom line.
As of today Costco opened its first store in China and such was the popularity it had to temporarily close due to overcrowding concerns, a fantastic problem to have.
Costco is somewhat resilient to recession, the demand for bulk value grocery increases as times get tough.
Think $COST has run too far? Think again...NASDAQ:COST It really pays to understand the "log" button on your chart and when to use it. Because looking at COST monthly chart in this way shows a very clearly defined channel and midpoint line. So, instead of looking like an unchartable stock that looks as if it has to be out of gas, it becomes much clearer that in fact, it could have much further to go. This is further evidenced by the Stochastic Indicator, which is nowhere near a point of exhaustion. So COST will likely rise up to the 297-300 mark which is resistance in this smaller, inner channel currently being ridden. Then comes the decision point, and if COST is able to break past 300 convincingly, it is very possible--even likely--that it could be sitting 370-380 by the end of 2019 without too much fuss. Beautiful, strong chart here. Below is an example of what this exact same chart and trend lines look like if you keep the monthly chart in linear mode. Good luck charting that thing. Happy hunting, hope we all make it out alive!!
Congrats to Subscribers: Costco Up Over 26% After Alert!It is very easy to read price action if you have a reference point. These support/resistance lines are there to help you read where the buyers and sellers are likely to make a stand.
MasterChartsTrading Price Action Indicators show good price levels to enter or exit a trade.
The Blue indicator line serves as a Bullish Trend setter.
If your instrument closes above the Blue line, we think about going Long (buying).
For commodities and Forex, when your trading instrument closes below the Red line, we think about Shorting (selling).
For Stocks, I prefer to use the Yellow line as my Bearish Trend setter (on Daily charts ).
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$COST Everyone loves Costco, but not at $240 & 30 P/EIts is not uncommon for NASDAQ:COST to fall on a good earnings report and it always bounces back within a few months, longs are probably a bit apprehensive going into earnings as selling has been quite intense this week. When consulting they technicals the stock has actually been showing bearish divergences since early May, as the price climbed the RSI, MACD and CMF have all steadily dropped.
Sentiment in the market is poor, but Costco is one of those companies immune to certain economics that affect others, consumers always want good value and Costco offers that, in good and bad times. The subscription model also provides recurring guaranteed income, which investors love but at a 30 P/E ratio it getting a little expensive
The best policy is to wait and see on this, because if the breakout fails and support breaks a drop to $220 is very possible to fill that gap
THE WEEK AHEAD: COST EARNINGS; EEM, OIH, XOP, TSLAEARNINGS
COST (46/25) announces earnings on Thursday after market close, so look to put on a play in the waning hours of the regular New York session.
Pictured here is an iron condor in the July (53 days) expiry with the short options at their respective 20 delta strikes. Preliminarily, it's paying 1.55 at the mid price, a smidge shy of one-third the width of the wings, with break evens wide of the expected move at 228.45/266.55 and delta/theta metrics of -1.41/1.93, and a buying power effect of 3.45.
For those who don't like waiting as long for their candy, the June monthly (28 days) iron condor with the shorties set up nearest the 20 delta -- the 230/235/260/265 is paying spot on one-third the width of 1.68 with break evens at 233.32/261.68, delta/theta metrics of -1.65/3.80, and a buying power effect of 3.32.
As of Friday close, the May 31st (4 days) to June volatility contraction is from 34.7% to 24.7% or about 28.8%.
Look to manage intratrade by rolling the untested side toward current price on approaching worthless with a 50% max take profit target.
BROAD MARKET
Majors are at the lower end of their 52-week ranges with background implied in QQQ and IWM in the low 20's; SPY and EFA, in the teens:
EEM (32/21)
QQQ (27/21)
IWM (28/20)
SPY (27/16)
EFA (23/16)
The EEM July 19th 36/40/40/44 iron fly is paying 25% of the width of the longs (8-wide) at 2.05 and break evens right at the expected move of 37.95/42.05, delta/theta metrics of -9.01/1.09, with a buying power effect of 1.95. Look to take profit at 25% max, as you would with a short straddle. Generally, these can't be effectively managed intratrade to delta balance without adding setup, so any trade management has to occur toward the back end of the cycle (i.e., taking untested off at approaching worthless, rolling out tested, selling untested side against in new cycle, assuming that the roll out of the tested and the sell against can be done for a net credit).
QQQ is paying slightly more than one-third the width of the wings for the short option strikes nearest the 20's -- the 163/166/188/191: 1.16 credit, break evens at 164.84/189.16, delta/theta metrics of -3.55/1.55, and a buying power effect of 1.84. Manage intratrade by rolling in untested on approaching worthless toward current price; 50% max take profit.
A similarly delta'd IWM setup is paying 1.06: the July 19th 137/141/159/162, with break evens of 139.94/160.06, delta/theta metrics of -1.82/1.34, and a buying power effect of 1.94. 50% max take profit. Manage intratrade by rolling in untested on approaching worthless toward current price; 50% max take profit.
SECTOR EXCHANGE-TRADED FUNDS
Top 5 By Rank: GDXJ (45/28); ASHR (42/28); OIH (40/37); XLB (41/31); EEM (32/21).
The only short straddle paying in excess of 10% of the value of the stock is OIH with the July 19th 14 short straddle paying 1.51 versus 13.81 spot. The at-the-money short straddle in the closely correlated XOP (30/34), the July 19th 27, is also paying > 10%: 2.82 versus 27.12 spot. Manage intratrade by rolling in untested side on approaching worthless to cut net delta in half without inverting to a width greater than credits received; 25% max take profit.
SINGLE NAME WITH EARNINGS IN THE REAR VIEW
TSLA (62/83). The July cycle iron condor set up nearest the 20's -- the 150/155/235/240 is paying 1.78 at the mid, -31/1.65 delta/theta. Markets are wide, so look to do some price discovery if you want to get in on a play. Manage intratrade by rolling in untested on approaching worthless toward current price; 50% max take profit.
