Trade of the Day: Pitney Bowes Inc. (PBI)

Odds are on the bulls' side at the beginning of a month

By Ken Trester, Editor, Maximum Options

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Volatility is increasing, and the CBOE Volatility Index (INDEXCBOE:VIX) is now sitting at about 13.50 after reaching a high of close to 15 earlier this week. I warned previously that this is one of the things I’ve been paying close attention to, especially because it’s been moving up along with stocks over the past few weeks, which is not something we’d normally expect to see.

Now, on the bullish side, there is still a lot of cash on the sidelines, and the recent tax cuts mean that there is even more cash available to be pulled into the market. Of course, there’s also a lot of cash coming back to the U.S. through repatriation in what I would call a private quantitative easing program. Among other things, this cash is likely going to be used by companies to repurchase a great number of shares, which will have the effect of propping up prices.

We are also now at the beginning of February and, historically, the first four trading days of a new month in a bull market have a 75% chance of moving higher. This is when fund managers put a lot of new money to work for clients and, with the market having pulled back recently, there may be others out there looking to buy the dip.

My personal feeling is that the two down-days we got this week were warning signs of what could come further down the line, but I think we will continue to see some rallying action over the next month or two before we see a major decline. With that in mind, I’m recommending a bullish trade today:

Buy to open the Pitney Bowes Inc. (NYSE:PBI) Apr 14 Calls (PBI180420C00014000) at $0.55 or lower.

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