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Options Trader Pro
Advanced Trading Strategies for Big Profits in Any Market
Issues
Last week was the first week in what feels like months that the sellers really took control. And while it was hardly a disaster in terms of the indexes as the S&P 500 fell 1.3%, the Dow lost 1.11% and the Nasdaq declined by 2.85%, the pain was worse in individual stocks, many of which fell hard on earnings.
As earnings season approaches the midway point, and following the Federal Reserve’s announcement of a 25-basis point interest rate hike last week, the market continued its ascent. For the week the S&P 500 gained 1%, the Dow rose by 0.65% and the Nasdaq added 2%.
Sector and index rotation was the name of the game last week as money raced out of tech to end the week and into sectors that had not been participating in the market’s advance recently. That being said, this is not necessarily a bad sign as the S&P 500 gained 0.7%, the Dow rallied 2.08% and the Nasdaq lost 0.6%.
The market surged higher yet again last week, and traders are beginning to wonder if a run at new highs is in the cards in 2023. While there is a way to go until we reach those peaks, last week’s gains of 2.4% for the S&P 500, 2.3% for the Dow, and 3.32% for the Nasdaq gives the bulls hope.
The market came under some pressure last week as the S&P 500 fell 1.16%, the Dow lost 2% and the Nasdaq declined by 1%. And while the market lost ground, I would note that it was a holiday-shortened week, and option volumes were down dramatically.
You are receiving the typical Monday morning update today as the Cabot office will be closed on Monday, and then the stock market is closed on Tuesday. Have a great Fourth of July weekend!
The market’s steady advance came to a halt last week, though given the recent run higher, the losses felt “normal”. For the week the S&P 500 fell 1.4%, the Dow lost 1.67%, and the Nasdaq declined by 1.45%.
The good times for the bulls continued as the S&P 500 rose for a fifth consecutive week, its longest such streak since November 2021, and it was also the best week for the S&P 500 since March.
Ahead of a big week for the market, the S&P 500, Dow and Nasdaq all rose marginally last week.
For the first time in weeks, and maybe even months, the markets advance felt broader, as more and more stocks participated in the market rally. That, as well as the VIX getting clobbered, has me encouraged … for now.
Despite a couple concerning days to start the week, the bulls took control on Thursday and Friday as tech titan Nvidia’s (NVDA) earnings blowout triggered a “risk-on” bull run.
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Options Strategy
Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.
Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.
This guide will help you execute the three types of options strategies recommended in Cabot Options Trader: Buying puts and calls, covered call writing and spreads.
Guide to Options Trading — Pro Version
Using Options to Hedge a Portfolio


A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.

Options Education
I get questions quite often about how I use stops. Some traders have hard and fast rules such as “If I’m down 25% (or 50% or whatever) on a position I exit immediately.” I really don’t have such rules.
I haven’t written about the process of expiration.
Education: Put-Write
Adjusting Positions
Put-Write is a strategy that many traders use if they are willing to buy a stock, though at a lower level than it’s currently trading at.
Later today, we will execute our first Time Spread. If you are not set up to trade spreads then you will need to sit this trade out. (However, I recommend that you study this trade as it’s a great trading strategy.)
One of my readers recently took my advice and negotiated his options rates with his brokerage provider. I thought I would share with you his results.
A great way to get long market exposure, while also being short volatility is to sell a put spread. This is a strategy I like to use when volatility is high, which is often the case before earnings.
I thought I would let you see the mental exercise that I do when deciding on an earnings trade. The big stock with earnings to be released this evening is Netflix (NFLX).
Volatility in Options Pricing at Earnings
Over the last couple of days, I’ve written to you about Selling Put Spreads, Selling Call Spreads and Long Iron Condors. Now I am going to track how these three strategies will work for JPMorgan (JPM), which will announce its earnings tomorrow.
The Long Iron Condor position is the combination of a short call spread and a short put spread in the same underlying.