[Trade Idea] Blue + Green = White
Hey Traders! Here’s what we’re covering today:
- Redline Trade – Returns 300% first week
- Blue + Green = White – Nob Trades Flat
- Uranium – $LEU, $UUUU, $DNN, $CCJ – Buy Uranium Stocks.
Each Friday at 10 am ET, we share our best “redline” trade with Masters in Trading members. These “redlined” names see excessive Open Interest and Volume relative to that stock's overall outstanding tradable shares. We look at volume and open interest relative to a stock's overall float.
10/21 REDLINE MEMBER TRADE – $KEY – Large Regional Bank
Trade Idea: Consider Buying December 17 strike calls for $.50. If a trader buys 10 options for $.50 = Risk = $500.
Reward = Unlimited
Reasons for the Trade
- 55 days until expiry
- Fixed amount of risk + fixed amount of time
- Interest Rate Sensitive
- Bullish Options Flow Nov 16 call strike
- Relative Value Play vs other less expensive regional banks $FITB, $CFB, $SNV, $HBAN & $BMO
10/28 $KEY – one week later, $KEY December 17 strike options trade $1.40.
- RISK = $500
- 1 WEEK LATER = $1400
Here’s what I love most about trading. My passion is trying to find correlated assets that, over time, have a breakdown in the relationship because of pure supply and demand in the marketplace. These breakdowns create opportunities for risk-takers.
This is the core role of the trader, this is why traders exist. Traders exist to help markets trade efficiently. This type of analysis can be done with futures, but it can also be done with ETFs, stocks, and options.
The chart above shows the relationship between US Treasury Bonds that expire between 7 and 30 years, a 23-year difference.
This trade is represented by the white line.
The blue line represents the first 11 years of duration, and the green covers the next 12 years of duration of the spread represented by the white line.
Blue + Green = White
The Uranium markets trade differently than other commodities like Gold, Silver or Copper. Those commodities trade on an “open” market with public price discovery.
On the other hand, the prices of spot Uranium are negotiated privately between buyers and sellers. Because this price discovery is not transparent, companies that are exposed to the prices of Uranium can frequently trade without regard to Uranium’s spot price.
This disconnect between the price discovery of the actual commodity and publicly traded companies moving off pure supply and demand presents great trade opportunities for those paying attention.
Notice how we continue to buy Uranium (through $LEU) on all dips (chart above).
Masters in Trading Digest - Issue 133
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Every Sunday, we share 3 fresh trade ideas with all Masters in Trading Members. Join today and get Friday’s REDLINE Trade.
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The next issue will be released on Monday.
Until then, trade smart.
Thanks for reading,
Jonathan Rose
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