Traders returning from their Thanksgiving festivities have bullish charts aplenty to welcome them. Despite a market that gravitated higher over the holiday week, I continue to find quality options trading setups beckoning to spectators seeking the best trades.
Today’s pickings carry some common characteristics, but chief among them is their low risk and high potential reward.
These favorable risk-reward setups are the hallmark for active traders. Initiating trades where your potential gains dwarf your potential losses will generate profits over the long run, even if your win rate is only 50%.
Two of the most popular price patterns that are making an appearance today are the bull retracement and the bull breakout. The former consists of buying an uptrend once it’s retreated to support. The latter involves buying an uptrend once buyers muster enough strength to bust the stock through resistance.
That’s the pitch, now let’s get to the picks. Behold, three of the best trades for the week ahead.
Options Trading Strategies This Week: Alphabet
The technology sector continues to dominate the landscape. And while Amazon.com, Inc. (NASDAQ:AMZN) is receiving much of the limelight thanks to Black Friday and Cyber Monday, it’s Alphabet Inc (NASDAQ:GOOGL) that’s catching my eye.
Since jumping higher on earnings, GOOGL has formed a high base pattern to digest recent gains. And now that the 20-day moving average has caught up, the king of search looks poised to continue its advance.
All we need is a break over $1,060 to trigger the pattern’s completion and justify adding new bullish trades. If the rich price tag of Google shares has you cringing, worry not. We can build an options trade to make it dirt cheap.
Buy the Jan $1,060 call while selling the Jan $1,080 call for a net debit of $9. This creates a Jan $1,060/$1,080 bull call spread with the potential to double your money if GOOGL stock rises past $1,080.
Options Trading Strategies This Week: First Solar
Solar stocks are making a comeback, and nowhere are the newfound gains more stellar than with First Solar, Inc. (NASDAQ:FSLR).
FSLR stock screamed higher last month after surprising the Street with better-than-expected earnings. And like all stocks that sprint too far too fast, FSLR recently took a breather. The sideways consolidation has allowed overbought pressures to ease and moving averages to catch up.
With the 20-day moving average now resting just beneath the price, it looks like nap-time is over and a new advance is about to begin.
To capitalize on a year-end run and to exploit the high implied volatility, sell the Dec $60 puts for $2.55. As long as FSLR remains above $60 the put will expire worthless allowing you to pocket the entire $2.55 premium.
Options Trading Strategies This Week: Intel
Intel Corporation (NASDAQ:INTC) rounds out today’s trio with a clean bull retracement pattern. Rather than drifting near resistance, the selling in INTC was strong enough to deliver a bona fide pullback.
Compared to the chip stocks’ meteoric rise, however, the dip has been quite shallow. That suggests garden-variety selling over death-dealing distribution.
At some point, buyers will sally forth and buy this dip. And that makes me very interested in dipping my toes in the water now. With implied volatility still elevated in the stock, short premium plays make the most sense here. Sell the Jan $43 puts for 65 cents or better.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.
