Jeff Bishop Total Alpha: Avis Car Rental (CAR) trade Scored $23,000 In 72 Hours [Details Inside]

Market-changing catalysts can lead to oversized gains in just a matter of days. That’s why let’s dig into Jeff Bishop Total Alpha recent Avis Car Rental (CAR) trade that netted him over $23,000 in just a few days.

I know firsthand how market-changing catalysts can lead to oversized gains in just a matter of days.

That’s why I wanted to dig into my recent Avis Car Rental (CAR) trade that netted me over $23,000 in just a few days.

This Total Alpha trade required excellent timing to hit these profits.

Of course, everyone wants to swing for the fences all the time…

Which is natural…

But it’s a good way to blow out your account…

A lesson I learned the hard way at the beginning of my trading career…

I don’t want you to go through that same type of pain I did.

That’s why I put together this case study…

It highlights two of the most important factors which cause a stock to explode.

Sifting through the noise

Between the free and paid content out there, you can live in a world filled with chryons and blogs. Heck, my kids spend hours on their phones as it is!

Before running down a rabbit hole, any news story has to pass the usefulness test. It needs to provide me an edge on one of the following in order to make money.

  • Those directly affected
  • People or businesses indirectly affected
  • Able to narrow down with some specificity (IE it isn’t too broad)

Lastly, I need to make sure the information is actionable. While global warming is a hot topic, it doesn’t have the immediacy that bankruptcy does.

Narrowing it down

Once I traced the effects of that news, I began scanning for chart setups that are “ripe” for a news catalyst.

When I read the news that Hertz (HTZ) would soon file for bankruptcy, I thought about who might be affected:

  • Suppliers
  • Customers
  • Competitors

Then I have to ask the obvious question – why were they going bankrupt? In this case, demand fell through the floor, and it doesn’t look like that’s changing anytime soon.

More importantly, they couldn’t get enough cash to continue operations. Yes, they have a lot of cars, but they can’t liquidate them that quickly.

Given that, I see two main areas impacted: suppliers and competitors.

Suppliers aren’t likely to feel the marginal impact of Hertz going out of business. Car companies like Ford, GM have much bigger problems at the moment. Plus, rental car companies aren’t a huge portion of their customer base (though they are significant).

On the other hand, competitors seemed promising. If Hertz can’t function in this environment, chances are others would be in danger too. That leaves potential for some to be overvalued by the market.

Once I had that idea in hand, I went through the list and narrowed it down to Avis Budget Group (CAR).

I took one look at the chart, and it just screamed “YES”.

Chart analysis

CAR had already bounced off a new low and was now spending more and more time in the overbought levels of the RSI.

Additionally, the weakening of the momentum appeared as the trade began to dip to the 13-period moving average on the hourly chart.

Combine all that with a huge spike in volume early on April 29th, and the indicators were clear to me; CAR was likely going to take a hard pullback.

CAR Hourly Chart

Options Gameplan

Buy puts in-the-money and sell a call spread to cash in on the premium as well.  Like a “one-two” punch in the bulls-eye (get it?)

First, I bought the puts at the $18 strike.  With the candles already beginning to shrink through the morning, there seemed little chance of a push above that mark any time soon.

Next, I sold the calls at the $18 strike while setting up the spread by buying the $20 calls, both at a 2-week expiration; plenty of time to cash in.  This defined risk of only a $2 split on the spread gave me the safety I was looking for in collecting the premium as a bonus.

The Result:  A $20,000+ Payday in under 72 hours.

Of course, all of my Total Alpha Premium Members watched this trade from conception to sale.  Following along is super-simple when you’re literally the “play-by-play” as it happens in real-time.

I sure hope this helps you better understand the why and the how of the Total Alpha strategy.

Want to follow along in real-time?

Check out all the Total Alpha has to offer Right Here.

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop: Are You Ready For The Biggest Squeeze In Oil Prices?

Jeff Bishop has reason to believe that the oil industry will begin to see a wave of bankruptcies. But in order for you to take advantage of this boom and bust sector…You first need to understand what’s causing this pricing pressure, when it’s expected to hit, and who stands to gain.

Has this ever happened to you?

Less than a month ago we experienced negative oil prices for the first time ever in history, forcing drillers to halt production.

But since then, we’ve seen a steep recovery.

June crude oil futures have rallied from $6.50 to $25, a 286% rise off the April 21st lows.

But you know what?

I have reason to believe that the industry will begin to see a wave of bankruptcies.

But in order for you to take advantage of this boom and bust sector…

You first need to understand what’s causing this pricing pressure, when it’s expected to hit, and who stands to gain.


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THE WINNING STRATEGY THAT WALL STREET HAS BEEN HIDING FROM EVERYONE…

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Lower global production

For the first part of the year, Russia and Saudi Arabia felt the need to go tit for tat on oil production. Neither wanted to curtail supply, even in the face of plunging demand. That led to a current glut of inventory that’s filled up global storage.

Finally, the two agreed to cut output, only after the U.S. absorbed a portion of the reduction for Mexico. However, that only recently happened.

Oil production isn’t something that you instantaneously shut off and on like a light switch. It takes time to turn off production and quite a while to restart.

Here’s an idea of how demand and supply line up according to the U.S. Energy Information Administration.

The mismatch caused by the decline in economic activity created a massive build in inventories, which is why we saw crude already go negative.

So, how are we going to overcome such a massive amount of supply?

Simple economics!

Supply decrease

Global oil production didn’t just decline, it came to a complete standstill. To give you an idea of the scope of the change, we had 292 oil rigs in operation last week according to Baker Hughes. Last year, we had 805.

These rigs aren’t just something you turn off and on at the drop of a hat either. As I mentioned before, they can take weeks, if not months to return to full operation. That also assumes you can get the workers back.

On top of that, the U.S. is set to face a wave of bankruptcies in this sector in the coming months. Now, most market observers expected this to come at some point. The boom in fracking created an abundance of supply that wasn’t necessary.

However, having them all hit at once can disrupt the industry. Banks are tightening lending to these companies, fearful that they can’t even operate cashflow positive.

Add into this entire mix a reasonably large cut from Russia, Saudi Arabia, and other OPEC states, and you’ve got the makings of a supply cut that looks to overshoot its mark.

Demand potential

For as little as we know about the post-COVID world, there’s a possibility things return to normal quickly. It’s not likely, but it is possible.

Even under a more tepid scenario, consumer spending on energy is climbing as people return to work around the globe. It’s unlikely demand returns for jet fuel, especially given the asset liquidation in airlines.

You needn’t look any further than the U.S. summer getaway. Typically, Americans start their summer travels around June, with many hopping in the car to travel around the country.

Already, we’re seeing a preference for automotive travel over air for obvious reasons. While one doesn’t make up for the other, it’s nonetheless a key driver for consumption going forward.

Big integrated are my favorite plays

Just the other week Hertz Rental Cars (HTZ) filed for bankruptcy. That caught me off-guard, as I thought they had a better balance sheet.

That goes to show you that even the big guys hold risk…and it’s why I don’t want to mess around with smaller oil names.

Companies like Exxon Mobile (XOM), Chevron (CVX), and Conoco Phillips (COP) have withstood the test of time. If I’m going to play a rebound in oil, I’d start with these guys. They not only have the money to withstand this soft patch, but snap up smaller competitors.

Now, the other way I like to diversify my risk is with the energy ETFs. My favorite is the XLE ETF that tracks the S&P Energy Sector.

XLE Daily Chart

The ETF not only has a beautiful uptrend, but it yields a nice 2.68% dividend yield.

Are there other plays out there with greater potential return? Sure. But, I find these ones to offer the best return when you account for risk.

Accounting for risk in your trades

Risk is number one in my book for concepts traders need to understand. It’s broken some of the biggest funds out there that ignored some basic precepts.

One way to get a jump on the market is by learning the essential skills and strategies taught in the Total Alpha Bootcamp.

Click here to discover the power of options, enroll in the Total Alpha Bootcamp today.

 

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Options Selection Process Revealed

Picking the right option contract can mean the difference between hundreds, if not thousands of dollars. Jeff Bishop is going to teach you his options selection process.

Has this ever happened to you?

You have high conviction on a trade so you decide to trade options because they give you more bang for your buck. You place the trade, the stock does exactly what you thought it would do, but you end up losing money anyway.

Nothing is worse than getting everything right in the trade except for the options contract.

Most traders don’t think about it until the very end. But it should be the first thing that you look at. Picking the right option contract can mean the difference between hundreds, if not thousands of dollars.

Today I’m going to teach you my options selection process.

After reading this I’m confident you’ll become a more profitable and consistent options trader.


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THE WINNING STRATEGY THAT WALL STREET HAS BEEN HIDING FROM EVERYONE…

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FULL DETAILS HERE


Jeff Bishop’s Options Selection Process – Expiration

As I mentioned in the video, I want to go out roughly 2x-4x the amount of time I expect a trade will take to play out. So, if I think it takes a week for the trade to work, I’ll go out 3-4 weeks.

One thing you need to understand is how option cycles work. Some stocks have weekly expirations, while others only have monthly dates. Stocks with weekly expirations are typically more popular and have higher volumes.

However, the drawback is the weekly options may not have a lot of volume on the contracts you want. That means you could face wide bid/ask spreads, which tends to lead to you paying more to the market makers for an option contract.

When I can, I prefer to stick with the option contracts that have the highest liquidity (trade the most often). Especially in this environment, I want to stick with bigger names so that I can capture as much of the move as possible.

Jeff Bishop’s Options Selection Process – Strike Price

One of the key components to any option is the strike price you choose. The strike is the price where the option contract is tied.

For example, if I buy a call option on AAPL at $270, that gives me the right to buy 100 shares of Apple per contract at $270. Conversely, if that was a put contract, I’d have the right to sell that same amount at $270.

Each strike price has a greek value known as a delta that goes with it. The delta tells you how much an option will move for a $1 change in the stock’s price.

At-the-money options are always 0.5 (or negative 0.5 for puts). The further out-of-the-money you go, the lower the delta. As you get further in-the-money, the delta moves towards 1.

This is a graph that shows the relationships between delta, price and time for call options on a $55 stock.

The longer you have until expiration, the more of an ‘S’ the delta curve makes when you graph it against a change in a stock’s price. As you approach expiration, the line becomes straighter.

Now, this means that options further out-of-the-money will move more with the stock in percentage terms, but are also the most exposed to time decay.  As a stock approaches expiration, the extrinsic value heads towards zero.

Note: Intrinsic value is the price of an option that would remain if you exercised the option today. Extrinsic value is anything remaining. Once a stock goes above a call strike or below a put strike, it will have an intrinsic value equal to the difference between the stock price and the strike price.

Now, when I trade options, I prefer to buy options that are a little bit in-the-money. That will typically cost more, but I’m hit with less time decay. The highest amount of time decay hits at-the-money options.

Typically, I’ll go for an option that has 0.6 or -0.6 deltas. You can see what that looks like in this option chain below.

In this case, the price of the stock is $214.81. The 0.6 call option delta would be the $211 call while the $219 put would be the -0.6 delta.

Jeff Bishop’s Options Selection Process – Implied Volatility

The last thing I consider when choosing my option contract is implied volatility. Typically, implied volatility is higher the further out you go and lower the closer you are to expiration.

That means that any opinion I pick will suffer from time decay and potentially implied volatility decay.

So, I want to be careful when I choose my options contract. Every stock has its own implied volatility as well as each option contract.

One of the reasons I never hold option contracts through earnings is because they lose a ton of value after earnings are released. Implied volatility rises into the announcement and falls immediately afterward.

Similarly, when stocks fall a lot (like the recent crash), options contracts get more expensive. That makes it difficult to make money trading long options because you have both time decay and implied volatility decay working against you.

The trick is to balance implied volatility with the chart. I look at the implied volatility rank to get an idea of whether I’m facing historically high implied volatility. IV rank looks at the range for implied volatility over the last year and tells me where the current IV is as a percentage of that range.

For example, if the IV range was from 25-75 and the current IV is 50, then the IV range would be 50%.

Jeff Bishop’s Options Selection Process – Free Options Masterclass

Your learning doesn’t have to stop here. I have a free options masterclass coming up where we go into even more detail, discussing key concepts like a stock’s lifecycle. You definitely don’t want to miss this.

Click here to register for my free options masterclass.

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop Total Alpha: You Can’t Start Your Trading Week Without This

Don’t start plopping cash down into stocks quite yet. There’s still a lot of data we still need to cover before deciding on the best course of action. For that, we start with the one place your money requires you to pay attention to – earnings.

We’ve got a jam-packed week coming up with information flying at us from all angles.

Signs finally started to emerge of progress as New York’s new Coronavirus cases began to plateau day to day.

Looking across the pond to Italy, they’re finally seeing a meaningful decline in cases. Even Spain has begun talking about restarting the economy.

However, don’t start plopping cash down into stocks quite yet.

There’s still a lot of data we still need to cover before deciding on the best course of action.

For that, we start with the one place your money requires you to pay attention to – earnings.


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THE WINNING STRATEGY THAT WALL STREET HAS BEEN HIDING FROM EVERYONE…

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FULL DETAILS HERE


Brother Can You Spare Some Change

Banks kickoff the most curious earnings season in history. We get our first insights into how far demand fell from the Coronavirus.

Jaime Dimon and other CEOs already set expectations for economic retrenchment worse than the Great Recession. Lending certainly fell outside of the government stimulus measures.

Three key areas will tell us a lot about the coming months. First, oil and gas loans.

Investors already know which banks hold more risk from fracking exposure. What I really want to know is how bad things will get. Are we going to see 50% of drillers fold or has most of the clutter already been swept off the board?

Second, financial market stability. Nearly every recession or depression starts and ends with the banks in one way or another. If CEOs start talking about tightening credit conditions or liquidity issues, that’s when we need to worry.

Finally, the consumer outlook. I don’t expect they’ll be able to offer much insight with so much unknown. However, listen for clues about which sectors continue to spend despite the lockdown.

Country Roads, Take Me Home

Two major transport companies give us our first look into main street. JB Hunt (JBHT) and Delta Airlines (DAL) offer a look at the bookends of the economy

Delta is sure to be an interesting earnings call. Reports stated they are hemorrhaging $50m a day.

Their balance sheet and operations shine compared to United Airlines (UAL).

But, their exposure to international air travel hurts more than Southwest Airlines (LUV).

With the stock beaten up like every day is its first day at school, I want to know how they plan to survive.

Specifically, will they require government money, or can they exist on their own credit?

Image

DAL Hourly Chart

If they can offer a pathway back to former glory, shares could surge higher.

At the other end, JB Hunt tells us exactly how our transportation network changed.

We already know that food distributors from Sysco (SYY) to Gordon Foods were forced to rethink their food supply chains.

I expect to get an idea of how much demand really increased through grocery stores.

That should give us a sense of whether they and consumer staple companies deserve richer multiples.

The Kids Can Hear You Fighting

Any rare moments of bipartisanship were fleeting at best.

As the paycheck protection program runs out of funding, Republican leaders quickly moved to shore up the program.

Yet, it appears they didn’t inform their Democratic colleagues beforehand. Democrats want to provide additional money for state and local governments and hospitals.

However, Republicans balked at the idea, refusing to broaden the scope beyond the PPP, wanting to save those negotiations for the phase four stimulus.

At least their cordiality is a step above the Brooks-Sumner affair of 1856, in which one Senator Brooks beat Senator Sumner to within an inch of his life using his walking cane…so that’s something.

The money will flow eventually regardless of any jawboning, and there will be funds for both sides, it’s inevitable.

Despite bluster at the federal level, the White House abdicated responsibility for managing the crisis to the states.

Any guidelines or lockdown from the executive branch hold very little sway in the direction of the country, including any councils to re-open the economy.

Instead, we’ll be left with a patchwork of regulations and tests that likely impedes the economic restart.

Even if restrictions at all levels were removed, a large segment of the population likely won’t wander outdoors until we have some extensive testing or vaccine implemented.

Data Delivery

We’ve got some key economic data coming out this week that’s sure to spark some dinner conversations.

March retail sales give us our first comprehensive look at the gravity of the slowdown.

I’ll be interested to see if there’s any life in the hardest-hit sectors. We’ll probably get a few surprises in here as well.

Jobless claims hold the hotspot Thursday. It’s unlikely that we still have captured the full extent of all the claims.

Many out-of-date state systems can’t keep up with the load, creating massive bottlenecks.

Not to be completely left out, we get a look at home buying data which is sure to be abysmal.

It’s got to be tough to shop for a new place when you’re locked in your old one.

Expected earnings dates listed in (…)

Stocks I want to bet against…

TLT (none), ZM (Mar 4), COST (Mar 5)

Stocks I want to buy…

MJ (none), UNG (none), XLE (none), WDAY (May 26), TWLO (May 3), OLED (May 7), V (Apr 22), IRBT (Apr 28), DPZ (May 20), GOOGL (May 4), CVNA (May 13), CMG (Apr 22), NFLX (April 21), AMZN (Apr 23), UBER (Jun 4), GDX (none), ROKU (May 13), MTCH (May 5), TDOC (May 5), ZS, AYX, RH, WORK, IWM

This Week’s Calendar

Monday, April 13th

  • None
  • Major Earnings: Delta Airlines (DAL)

Tuesday, April 14th

  • 7:45 AM EST – ICSC Weekly Retail Sales
  • 8:30 AM EST – Import Prices March
  • 4:30 PM EST – API Weekly Inventory Data
  • Major earnings: JB Hunt Transportation (JBHT), Fastenal Co (FAST), First Repub Bank (FRC), Johnson & Johnson (JNJ), JPMorgan Chase & Co (JPM), Wells Fargo & Company (WFC)

Wednesday, April 15th

  • 7:00 AM EST – MBA Mortgage Applications Data
  • 8:30 AM EST – Retail Sales for March
  • 8:30 AM EST – Empire Manufacturing for April
  • 9:15 AM EST – Industrial Production & Capacity Utilization for March
  • 10:00 AM EST – NAHB Housing Market Index for April
  • 10:30 AM EST – Weekly DOE Inventory Data
  • Major earnings: Bank of America Corporation (BAC), Citigrp Inc (C), Goldman Sachs Grp (GS), PNC Finl Svcs Grp Inc (PNC), UnitedHealth Grp Inc (UNH), US Bancorp (USB), Bed Bath & Beyond (BBBY)

Thursday, April 16th

  • 8:30 AM EST – Weekly Jobless & Continuing Claims
  • 8:30 AM EST – Housing Starts & Building Permits for March
  • 8:30 AM EST – Philly Fed Survey for April
  • 10:30 AM EST – EIA Natural Gas Inventory Data
  • Major earnings: Abbott Laboratories (ABT), Bank of New York Mellon Corp (BK), Blackrock Inc’A’ (BLK), KeyCorp (KEY), Rite Aid (RAD), United Airlines Hldgs Inc (UAL), Western Alliance Bancorp (WAL)

Friday, April 17th

  • 10:00 AM EST – Leading Index for March
  • 1:00 PM EST – Baker Hughes Rig Count
  • Major earnings: Danaher Corp (DHR), Honeywell Intl (HON), Kansas City Southern (KSU), Regions Finl Corporation (RF), Schlumberger Ltd (SLB), State Street Corp (STT)

Click here to register for my free options masterclass.

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop Total Alpha Strategy:This Says The Market Is Ready To Rally

You know exactly what that circle represents. If you don’t, no worries. I’ll review it here, and explain it to anyone who hasn’t gone through the class.
We’ll be looking at fresh charts on the VIX, TLT, and IWM…aka the big picture

If you thought the market’s reaction to the weekend news was positive, I’d also like to add an observation I’ve been witnessing.

There is a specific trend I’ve noticed over the last week. And all has to do with the market’s fear index, the VIX.

It rises during periods of uncertainty and market sell-offs. And declines during bull markets and slow moving-markets.

Take a look at the chart below:

VIX Hourly Chart

And since you’re well-versed in what I covered in class, you know exactly what that circle represents.

If you don’t, no worries.

I’ll review it here, and explain it to anyone who hasn’t gone through the class.

We’ll be looking at fresh charts on the VIX, TLT, and IWM…aka the big picture

Betwixt The VIX

The VIX measures the implied volatility of options on the S&P 500. Think of implied volatility as the demand for options. Demand tends to increase as markets fall and visa versa. So, what does this chart tell us?

VIX Hourly Chart

That circle tells us three critical pieces of information. First, the VIX closed at the dead lows of the week, and it didn’t just get there on the last day. The VIX spent the entire week in a slow bleed lower.

Second, we’re trading below the 200-period moving average on the hourly chart. That’s a crucial point as that typically acts as support. Yet, the VIX didn’t even bother holding there. It strutted past it like a jilted lover.

Third, the 13-period moving average continues to ride below the 30-period moving average. When you get a faster moving average holding below a slower one, it highlights an ongoing downtrend.

I want to let you in on a little secret.

We’ve got the exact same phenomenon happening in the VVIX, which measures option demand on the VIX.

VVIX Hourly Chart

Lower implied volatility on the VIX often means that stocks want to move higher. When both the VIX and VVIX echo the same story, it’s likely we’ll see a rally.

A Crude Story

Last week’s rally started in part from the crude markets. That shouldn’t surprise most of us as the plunge in crude last month kicked off the second, steeper leg of the decline in equities.

Supposedly, Trump managed to bring the Russians and Saudis to the negotiating table. Both turned on the oil faucet, creating a glut of supply against declining global demand. However, Monday’s meeting has been postponed after some jawboning by both sides.

Nonetheless, we’ve seen one of the most historic dives in oil prices. We shouldn’t be surprised to see rallies that leave skid marks.

USO Hourly Chart

While we haven’t quite crested the 200-period moving average, we’ve got a 13-period crossing over the 30-period moving average. This ‘money-pattern’ tells me oil wants to at least hit the 200-period moving average. Plus, we’ve got a pretty bullish setup there as well.

Things Still Suck Long-Term

Make no mistake…any short-term rally is meant to cause shorts a lot of pain. However, the bond market says we can’t get complacent.

Money continues to flow into treasuries, hoping to hide out from stocks. You can’t look at this chart and see anything but the bond bulls in the chart.

TLT Hourly Chart

Yes, it will be difficult for bonds to make new all-time highs. Heck, they’ve experienced their own record rallies. If we went much further, we’d see negative rates in the U.S. pretty soon.

Small Caps – Big Drops

Two areas continue to get butchered: small caps and financials. Most people aren’t aware, but the Russell 2000 small-cap index has a heavier weighting of financial companies than the S&P 500. It’s also more susceptible to economic risk as smaller companies have shallower balance sheets than the big guys.

When I look at the IWM hourly chart, I can’t help but wonder when it’ll fall apart.

IWM Hourly Chart

Not only does the chart have a bearish crossover, but it continues to far underperform the other major indexes. The SPY finished down 2.06% last week. That’s Warren Buffet compared to the IWM’s -7.05%.

From the all-time highs, the IWM is down 38.66% compared to the SPY at -26.8%. Small caps tend to lead the rest of the market which tells me the bears are far from done ripping things apart.

Did You Miss The Masterclass?

Not to worry. I’ve got another one coming up shortly, so while you’re trapped indoors, do yourself a favor and get a free education.

Click here to register for my free options masterclass.

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop Total Alpha: These Indicators Will Help You Harvest Profits

I’ll start off by saying that I’m not a big fan of indicators. There are far too many of them, and folks rely on them way too often. There’s only a handful of them you can rely on during good and bad times.

For me, it has to be – moving averages.

Everyone from Wall-Street’s biggest honchos to the South Florida retiree drops these guys into their analysis.

However, only the successful ones know exactly how to deploy them for big money.

Here’s a great example from my Total Alpha Portfolio. I used a moving average crossover to score a nice $13,000 profit.

This is the same techniques I talk about in my upcoming masterclass

Most of you are probably familiar with moving averages.

However, I want to drop some insights that will give you a whole new perspective on the topic. Stuff that you can take and immediately apply it to your trading.

Study it, and it will not only make you better, but also more profitable.

Types of Moving Averages

Moving averages fall into two major categories: simple and exponential.

Yes, there are other categories such as adaptive. However, I’ve never found much use for them and don’t feel they’re worth discussion.

Simple moving averages take the average of a bunch of closing prices over a set period on whatever timeframe you’re using. For example, a 13-period moving average takes the average closing price for the last 13 periods on whatever chart you’re looking at – daily, 15-minute, 1-second, etc.

Exponential moving averages add a weighting to more recent prices than a simple moving average. The amount of weight increases the closer you get to the current price. This creates a much more responsive indicator compared to simple moving averages.

Institutional Moving Averages

Ever wonder what the big boys use on their charts? I’m going to tell you. When I talk about institutions, I’m speaking about funds, not floor traders. We’re talking large amounts of money that takes time to move in and out of trades.

That said, the big funds rely on two major simple moving averages – the 50-period moving average and the 200-period moving average. Big money tends to look at daily and weekly charts.

Ever heard of the death-cross or golden-cross? That’s when the 50-period moving average crosses below/above the 200-period moving average on the daily chart. When they haven’t touched in a while, it’s a signal that the longer-term trend has changed.

We recently saw this pop up on the SPY chart.

SPY Daily Chart

I guarantee you’ll start hearing about it on television if you haven’t already.

Now, should this matter to you? Heck no! Most funds underperform the market. Take advantage of their stupidity.

Incorporating Moving Averages

No matter which types of moving averages you choose, it’s essential to have a slow and a fast moving average. The fast one should look at a smaller number of periods (somewhere between 5-20) while the slower one should look at a larger number (around 30-60).

Fast-moving averages respond quicker to price changes than the slower ones. When you compare them to the slower moving averages, they indicate the trend is changing. The distance between the two tells you the strength or weakness of the current price action.

The Infamous Money Pattern

Throughout my career, I found one moving average pattern that worked time and again for me. I call this the ‘money pattern.’

The money pattern is pretty simple. First, I start with the hourly chart. Next, I plot the 13-period and 30-period simple moving averages. Then, I look for them to cross when they haven’t touched in a while.

Seems simple enough, right? It can take a little bit of practice. Let’s go back to the SHOP chart from earlier.

SHOP Hourly Chart

Shopify is an excellent example of the money pattern in action. As the market plunged, so did this stock. Over a couple of days, the stock started to build a base. Then, it launched higher, which brought the 13-period moving average above the 30-period moving average.

Once the stock pulled back into that convergence, I made my move. In order to cap my risk, I sold a put credit spread. That let me decide exactly how much I wanted to risk and my maximum total reward, creating a high probability trade.

Get the best tools and training around

The money pattern is just one of several tools in my arsenal that I readily deploy. In fact, I’ve created a Total Alpha Masterclass to help traders learn these very secrets…for free.

Since we’re all stuck at home, now is a perfect time to enhance your trading without spending a dime.

Click here to sign up for my free options masterclass.

Source: TotalAlphaTrading.com | Original Link

Total Alpha Trading: Stop Trading Options 30 Days Out, Here’s Why

There is something different that’s happening to the options market right now. And if you’re not aware of it, it could end up costing you a lot of money.

Optimal mechanics state that you want to sell options or spreads with expirations 30-45 days out. This maximizes your time decay and the probability of success.

Try that now, and you’re probably staring down at a winnowing portfolio.

Traders hate uncertainty. That’s why we see volatility higher in later-dated months than in the near-term under normal conditions.

If you think about it, that makes sense. We never know what the future holds from earnings to black swan events.

However, the market is gripped with so much fear and panic, everyone is racing to protect their portfolios right now.

In other words, the market is telling us that investors expect things to calm down in the future.

You actually see this happen around earnings all the time! Earnings are big unknown events. Traders don’t know what will happen, so they bid up option contracts expiring just after their release.

Traders use the terms contango and backwardation to express these two different phenomena.

It is incredibly rare for backwardation to exist in the VIX and overall volatility, but that’s the world we live in right now.

I want to explain what this means for you, why this happens, how it changes the risk structure, and some strategy adjustments along with examples to not just save yourself some coin, but make a few along the way.

Why Near-Term Options Are So Expensive

Take a look at a current option chain for the IWM:

IWM Implied Volatility

What you’re looking at is a list of all the expirations for the IWM going out of a couple years. Down the right side is the average implied volatility across all the options.

Here’s what’s unusual. See how the implied volatility gets lower as you go further out. That only changes around September.

So what’s causing this?

We’re seeing investors clamor for protection, buying up puts left and right on everything from the SPY to AAPL. They fear the current uncertainty but think it will clear itself up eventually.

That’s why short-dated options have higher implied volatility than longer-dated ones.. It signals investor panic.

However, this creates an excellent opportunity for Total Alpha Traders.

How time and risk changed

In the past few weeks, we’ve had 10% swings in the market in a single day! That’s extraordinary when you compare it to the 30% gain stocks made in all of 2019.

When you seek option expirations further out in time, you get paid more as a seller. However, instead of having natural declines in implied volatility working for you along with time decay, implied volatility works against you.

Think of it this way. Under normal conditions, options lose value over time both from time and volatility decay. As an option seller, you have both things working for you.

Right now, we have the exact opposite happening for volatility. You still get time decay working for you, but currently, volatility is working against you. That’s why going out further in time actually increases your risk in this environment.

This is how I’m playing the market

I’ll start by saying that the risk right now is to the downside. However, we can get face-melting rallies in the interim. So, I want to make sure that I create high probability situations for myself.

Right now, that means I’m selling credit spreads, strangles, and naked options far out-out-of-the money…but with shorter-dated expirations. Instead of 30-45 days out, I’m picking options with one to three-week expirations.

For some of the riskier options strategies like strangles and naked options, I’ll play it close to the vest, typically going out only a week or two. With implied volatility so high, I’m getting enough credit for these trades I don’t need to take on the extra risk.

Here’s an example from yesterday. I sold AAPL puts that expire April 3rd (10 days away) at the $185 strike price for $4.15 in my Total Alpha Account.

That’s a massive credit. I’m getting paid 2.24% of the strike price for just two weeks. Plus, the stock is over 15% away from that strike.

Two things could hurt this trade. First, if implied volatility continues to rise, that would make the options more expensive. That’s possible but not very likely. With IV at record levels, odds favor an IV contraction.

Second, and most apparent, if Apple trades below $185 by more than $4.15 at expiration, I lose on the trade. The amount I lose depends on how far below $185 the stock goes.

This inversion will pass

Nothing lasts forever (though it may feel like it). At some point, the market will find a bottom. Even during the Great Recession, inversions in volatility righted themselves out often within a month.

It could take the entire summer to work through what we’re seeing now. The key is to be prepared for when it turns. That starts with knowing how to read the charts and look for the signals.

One place to acquire these skills is with my upcoming masterclass. You can register for free to learn how I look at the life cycles of stocks and trade options in my personal portfolio.

Click here to learn register.

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha:These Are The Companies The Government Will Bail Out

Extraordinary times calls for extraordinary measures. Ask most congressmen about the bank bailout in 2008 and they’ll wrinkly their nose in disgust.

Ask them the same question about the airlines and they’ll readily say they need help…but it’s not a bailout.

Call it what you will, the government will not and cannot let certain industries go under for reasons from national security to financial stability.

That doesn’t mean you can’t find great pickups right here and now. I’ve already been dipping my toe into some of the gaming stocks in my Total Alpha Portfolio.

We need look no further than Boeing (BA) as the leader of this push. There is zero chance the U.S. government will allow its only commercial airline manufacturer, and one of two in the entire world to go under.

BA Weekly Chart

I like that the stock worked its way into the 200-week moving average. Typically, that’s a great support level to trade against.

However, Boeing isn’t the only company that looks good out there. Let me walk you through some other stocks I expect to get government assistance.

Delta (DAL), United (UAL) and American (AAL) Airlines

Transportation has become a backbone of our lives. We actually take for granted the current airline network that lets us travel home for Thanksgiving.

Back in the early days, airlines were heavily regulated entities. Ticket prices would be the equivalent of thousands of dollars today. It also became a classy affair where people dressed up to travel.

You may not realize it, but a huge portion of our economy is enabled by the passenger airline industry. Ever taken a flight for your company? You’re not the only one. Tens of thousands of people fly every year as consultants, salespeople, executives, and any number of roles that require frequent travel.

That’s why we can expect the government to step in to save the airlines. Some regional carriers have already closed up shop. I expect there will be more of those to come. Heck, I see potential consolidation in the airline industry.

You may be curious why I left out Southwest Airlines (LUV). Of the major airlines, they are much better capitalized than these three. I’m not sure they’ll need any funds to stay afloat.

If you don’t want to take single stock risk then the JETS airline ETF works well. It holds a basket of the major airlines and is an indicator for when things are likely to turn.

JETS Weekly Chart

Ford (F) & General Motors (GM) 

They bailed them out once, I bet they do it again. Trump needs to keep the midwest states in his corner for reelection. They were a key contributor to his 2016 win. Politically, he can’t afford to allow them to fail.

Economically, cars still create a foundation for our economy. The U.S. government isn’t going to let the only auto manufacturers to exist in the U.S. be foreign companies. It creates too much of a security risk and is a big reason they bailed them out over a decade ago.

Now, I’m not certain that they do more than loan them funds. There’s also talk of retooling their machinery to produce ventilators and medical equipment. Plus, with direct payments to citizens likely to hit most of their employees, it’s tough to say how much direct funding they’ll take.

Royal Carribean (RCL), Carnival Cruise Lines (CCL). & Norweigian Cruise Lines (NCLH)

They’ll probably be some other private companies as well that get added to this list. Cruise lines have been hurt in particular because of their close quarters. A major portion of their revenues come from the elderly soaking up their retirement.

Right now, all their ships are docked, which keeps their operating costs fairly low. However, like the airlines, there’s plenty of costs from just sitting idle. The worst is yet to come as demand will be much slower to recover here than most other places.

With the large amount of jobs this industry supports both directly and indirectly, I suspect they’ll get a similar deal as the airlines. However, I expect that all of them will need to take it to stay afloat.

Strings Attached

Be aware that not all of these gifts will be free. They’ll likely be loans like the Troubled Asset Relief Program (TARP) issued to the banks. Eventually, they had to pay those back.

We’re already seeing negotiations about whether they’ll restrict stock buybacks, executive pay, or other caveats.

The best way to play this is to use the charts as your guide. You can pick up some easy skills in my upcoming masterclass. I’ll give you the tools to start scoping out trades before you know it.

Click here to learn register.

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha: This Is Where The Markets Are Headed

I’ve got something exciting to share with you today. Every day I get traders from Total AlphaBullseye, and even just random folks coming up on the street asking me where the market is headed.

That’s when I decided to put together an interview with Raging Bull’s Elite chatroom commentator and frequent Fox Business guest, Hitha Herzog.

Click here to watch my interview

There’s a lot of fear and uncertainty out there in the markets. I won’t tell you I have all the answers. What I can give you is my insights from decades of trading about what we can expect going forward.

Even more than that, let me add a little color to some of the topics I covered in the video.

Not Taking Long-Term Stakes Yet

In order for me to want to jump into this market, I have to have some idea about where I think things might be headed. At the moment, my ability to forecast this virus isn’t any better than what you see on television.

What we’re seeing now is unprecedented in every sense of the word. There’s nothing to compare it to no matter how hard you try. At no other time did a global pandemic become this widespread with a market running on easy money.

This week we saw the Fed fire nearly every bullet they had, which wasn’t much. Now, it’s up to lawmakers to figure out the rest… and that’s a frightening thought.

Flattening the curve for new infections saves lives but drags out economic shutdowns. The longer this drags out, the more likely we are to see systemic problems arise. I’m talking about bankruptcies that spiral into another credit crunch.

At the end of the day, I need to see new cases start to decline. That’s when we can start to survey the damage and see where things lie. Trying to guess before then is a great way to blow up your account.

Trade Nimbly

Recently, I wrote about 5 things I’m doing in the market right now. I discussed how I’m reducing my position sizes and trading smaller. However, I wanted to expand on that with credit spreads.

If you aren’t familiar with them, credit spreads come in two varieties: call credit spreads and put credits spreads. Both work the same.

  • Sell an option that is out-of-the-money on a stock
  • Buy another option that is further out-of-the-money on that stock with the same expiration
  • You receive a credit for this trade, which is the maximum amount you can make
  • The most you can lose is the difference between the strikes less the amount you received up front.

Now, I can close these trades anytime before expiration for partial profit. In this market, that’s exactly what I’m doing. I don’t want to hold these trades for too long, hoping to get maximum profit. My goal here is to make singles until I’m confident things are ready to turn.

Think About Trading Ranges

The majority of the time, I work as a swing trader. This market doesn’t exactly mesh well with that approach. So, I’ve adjusted to what’s out there.

Right now I’m trading against ranges. When the markets pop to the upper end of a range, I get bearish. At the bottom, I’ll get bullish.

With the S&P 500 ETF the SPY, I have a channel that’s being created by trendlines. Let me show you what I mean.

SPY Hourly Chart

The orange lines connect the highs of the candlesticks and the lows of the candlesticks. This gives me a range where I can trade against. Mind you, these don’t have to be exact. Rather, they just need to be approximate to give me an idea of where to play.

Get Educated

I cannot stress enough the importance of learning all you can in times like these. It’s not enough to be a good trader, you need to be a great trader. Nothing prepares you for battle like information.

Just the other day, as I sat there thinking about a trade, I realized that I was overthinkng things. When I thought back to what I taught in the masterclass I knew the answer was obvious.

Sometimes, going over the basics helps us recenter and prepare for what’s ahead.

So, with most of us at home these days, take a moment and register for my free master class. Even if you know everything about options, it always helps to take a step back and review the basics.

Click here to learn register.

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha: 5 Things I’m Doing In This Market Right Now

I won’t mince words. Yesterday was a bloodbath that wiped out a lot of market cap and probably blew up a few funds along the way.

With over two decades of trading, I want to give you insight as to what I’m doing now. Hopefully, you take away valuable information that helps strengthen your hand.

Let me throw you some of the highlights:

  • Oil dropped over 30% at one point
  • Bond futures had one of their largest two day runs ever!
  • Stock futures were halted overnight
  • Upon the open stocks were halted for 15 minutes

No one escaped the carnage, not even me. My first move was to cut my risk down immediately – although it took awhile for my options to price.

That’s why right now, I want to do the following: Define my risk. cut excess risk early, selectively sell premium, set smaller position sizes, and keep a balanced portfolio.


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Define Risk

These last few weeks remind me of why I prefer trading options. Options help me define my risk, letting me set the maximum losses in many cases.

Yes, days like yesterday can wipe them all out. But, I’ll live to fight another day and have some firepower. If I had held stock, that might not have been the case.

Plenty of people talk about how ‘risky’ options are. That can certainly be true. They’re leveraged products that move around a lot. However, that isn’t the way I trade.

I like to use defined risk strategies like Iron Condors, Credit Spreads, and limit long calls and puts to limit exactly how much I can lose. When I buy options, I pay a premium for this right. I use these strategies extensively in my Total Alpha portfolio exactly because I want to be around another day.

This is a good example of an Iron Condor I put on today in Total Alpha

Trading is about making a lot of small trades often. Some trades don’t work out. That’s ok. I want to make sure that no one of them obliterates my account. Instead, I play the long-game, letting the averages work out over time.

Cut Excess Risk Early

In my years of trading, when I want to take a loss, I do it early. The longer I wait, the more I lose. That’s why I spent a lot of time today cutting off positions that were likely going to never make me money.

My focus was to mitigate my losses. Especially with selling option credit spreads, taking your lumps early prevents you from taking a maximum loss on the trade. Of course, the markets can swing bag the other direction, and we’ll certainly see big rallies. But we could also see a few more drops before that happens.

I start by viewing my entire portfolio, then assessing which trades hold the most risk. This can mean cutting trades that are just too large for my taste. It’s not worth it to wallow in what could have been. Once I make the decisions, I stick with it and wipe the slate clean.

Selectively Sell Premium

There is a lot of illiquidity in the options market today. Spreads are extremely wide and favor the market makers.

I don’t plan to take many trades, but I see today as a wonderful opportunity to sell some volatility.

There is too much fear and pessimism at the moment.

Looking across the sectors, I want to find trades with high probabilities of success that rely more on volatility contraction rather than the directional premise. Volatility will contract at some point. I have much better odds betting on that than guessing where the stock might go.

An excellent example of one I took today in my Total Alpha portfolio was in Apple. The stock showed a lot more strength than the regular market. With Implied Volatility so high, I decided to sell a cash covered put against this stock.

This is an amazing credit for this stock and expiration!

Set Smaller Positions

Volatile markets don’t require a lot of capital to make good money. When the Dow swings around thousands of points daily, I don’t need massive position sizes. Instead, I’d rather let the increased volatility work in my favor.

Part of trading is knowing when you have an edge. Right now, my edge is selling premium. It either pays more for similar trades a month ago, or I get an increased win-rate.

Keep A Balanced Portfolio

With implied volatility so rich, selling premium means I can play both sides of the market. This is what’s known as ‘Delta Neutral.’ Iron condors are delta neutral plays because you sell a put credit spread and a call credit spread. These positions offset one another.

There are a few ways to keep a balanced portfolio. The first is to create neutral trades like an iron condor. You then manage the delta by adding or subtracting other positions around it as needed.

Second, you can use positions in other stocks to balance out the delta. That means using a put credit spread in a stock like Google to offset a call credit spread in a stock like Facebook.

Lastly, you can hedge your positions. This involves things like covered calls or buying stock or futures to offset your option positions.

Work With Someone Who’s Been There Before

This isn’t my first rodeo and hopefully, not my last. I know it can be intimidating out there. That’s precisely why I created Total Alpha. This service educates you and lets you see exactly how I’m trading this market through a live stream of my portfolio.

Click here to learn more.

Source: TotalAlphaTrading.com | Original Link