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Utilities have started to outperform, meanwhile other sectors are underperforming. Just looking at history, you only have to go back to 2015-2016's industrial mini recession and EM recession to see how utilities outperformed other sectors. During this time, $XLU rose 25% while the S&P was flat, and technology / other cyclicals were all negative.
Cyclical sectors ...
New bullish credit spread on XLU. Opened and moved above the $53 mark this morning. Looking for a higher low and mid 52s to confirm as support early this week.
Break even 53.21
Max profit 53.50
Buying into the weakness here in XLU, with a synthetic covered call set up.
-1 Nov16 $54 put for $1.87 cr.
Well California approved a bill to raise utility bills for its citizens to protect PCG from bankruptcy due to all the lawsuits against them for being liable for 12 wildfires. Looks like it breaks this resistance look for it to fill more of that gap. But one thing with upcoming elections must be watch if any candidates gets in to try to change this legislation ...
This video is the first of many, and I discuss the behaviors of the sectors and potential markets that are poised to trend in the near future. The "freshest" sectors quietly trying to start a new trend are the Industrial and Consumer Discretionary Sectors. The sectors (along with their industries) I think should be on every trend follower's radar are:
XLF - ...
In this video I analyze a live trade that I have been in for a few days now. I discuss how I was able to use price action to point out "red-flags" where it looked like price might turn against me. By acting on the price action I was able to get out just before a large drop and then get back in, almost where my trade originally started, but with a better cost ...
A bullish pennant forming with a potential for a large breakout to the upside. See chart for pattern and price targets.
IV isn't extremely high, but has spiked up a bit in Utilities, so I'm looking at placing a strangle here.
-1 Sept21 50/54 strangle for $1.14 cr. I will likely manage this position at 50% and we'll deal with specific loss mgmts when we get there.
With volatility at somewhat of an ebb here, I'm eyeing exchange-traded funds for directional plays in lieu of just hand sitting.
The setup pictured here is of a XLU diagonal with the long dated option out in Dec, the front month in August. I would prefer setting this up as a skip month (Aug/Oct), but an Oct expiry isn't available yet. Here are the metrics: ...
XLU is approaching a weekly support zone following the breakdown of the weekly wedge
Add it to the list of reasons we eventually stay lower.
Ofensive Sector (Tech + Discretionary) vs Defensive Sector (Utils + Staples) on SPX index.
... for a 4.63/contract debit.
Max Profit on Setup: $137/contract
Max Loss on Setup: $463/contract
Break Even: 50.63
Debit Paid/Spread Width: 77.2%
Notes: Will look to take profit at 20% max; roll short call at 50% decrease in value.
Although there are quite a few earnings coming up next week, only two catch my eye from a premium selling standpoint: Twitter and U.S. Steel.
Twitter announces on Wednesday before market open; has a 30-day implied volatility of 75.19%; and the May 4th 20-delta, 74% probability of profit 27.5/38 short strangle is paying 1.28 at the mid with its defined risk ...
The Utilities are in a 9 year uptrend and are either in a bear flag or fixing to break out to the upside and continue the trend.
Utilities (XLU) might be a good long idea here. As the markets get choppy, utilities like XLU might hold up well. Price above the 10sma and volume increasing.
... for a 3.02/contract debit.
This is a "properly" set up split month Poor Man's Covered Call where the credit received for the short exceeds the extrinsic in the long and has a neutral to bullish assumption. It's neutral because price can stay right here, and I can reduce cost basis further by rolling the short call out in time and/or it's bullish, because it ...
... for a 2.05/contract debit (82% of the width of the spread).
Another defined risk, neutral to bullish assumption setup in the April cycle ... .
The natural alternative would be to just sell short puts here (the April 20th 48's are paying .66; 32 delta), but the premium in those just didn't seem that worth it relative to buying power effect.
For example, ...