A strategy idea for options trading investors.
Market Outlook
Our indicators continue to give neutral to bearish readings, unchanged from last week. The 200-day Moving Averages Index remains below its 200-day moving average and its 50-day moving average is below the 200-day average, which in the past has been a very bearish signal. The Cumulative Volume Index is also below its 200-day moving average, and the Advance/Decline Index has now fallen below its 50-day moving average.
Ken Trester’s Fast Options
Recommended Fast Options Trade: Take-Two Interactive Software (NASDAQ: TTWO)
TTWO has fallen out of a nice uptrend and also below its 50-day moving average. It looks like it will continue moving lower if stocks fail to mount a rally. Here is the best way to play more weakness in Take-Two Interactive Software …
Buy TTWO Sep 14 Put up to $1.20 ($120 per contract).
After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $12.80. That should give you an option price of about $2.10, for a 75% profit.
Close this position and cut losses if the stock closes above $15.40, when the option price should be about 90 cents. The stock is currently trading at $14.49. The computer-simulated probability of this option hitting its target price is 21%.
Find more option analysis and trading ideas at Options Trading Strategies.
Recommended Fast Options Trade: Nvidia (NASDAQ: NVDA)
NVDA has fallen below support at $17.50 and also below its 200-day moving average. It looks like it will continue to move lower if technology stocks continue to fade. Here is the best way to play more weakness in Nvidia …
Buy the NVDA Sep 14 Put up to 75 cents ($75 per contract).
After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $14.30. That should give you an option price of about $1.40, for an 86% profit.
Close this position and cut losses if the stock closes above $17.20, when the option price should be about 50 cents. The stock is currently trading at $16.19. The computer-simulated probability of this option hitting its target price is 23%.
** All of our short-term recommendations can be taken for up to three days after they are recommended. Make sure the stock and option prices are close to where they were when we made the recommendation. If after three days you still have not gotten the position filled, cancel the order and wait for our new recommendations, as the profit probabilities may no longer be valid.
Action to Take on Current Position: Brocade Communications (NASDAQ: BRCD)
Sell-to-close the BRCD Oct 8 Call. The stock closed below its stop price Thursday.
Action to Take on Current Position: Qlogic Corp. (NASDAQ: QLGC)
Sell-to-close the QLGC Jul 15 Put. The position reached its three-week maximum holding period Thursday without hitting its target price.
Ken Trester’s Play of the Week
Action Taken on Current Position: BJ’s Wholesale Club (NYSE: BJ)
The BJ Jun 47.5-42.5 Put Credit Spread was closed Thursday when the stock traded below its stop price.
Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.
