Most traders would agree that the markets are ready for a large move in some direction, with most traders betting on a correction to the down side.
The markets are notorious for doing the opposite to what most traders think is going to happen.
The current scenario goes like this. Trader’s set up trades to the short side in anticipation of a large move down, then wake up to seven consecutive up days, not fun.
But the markets can’t go up any more can they? And the cycle repeats. There are many stories of traders blowing up their account in anticipation of a big move, only to have no way to trade the move when it actually happens.
LIMIT RISK
What is the solution? Look for high volatility stocks and buy options straddles or strangles, this way you can benefit from a large move in any direction, but do not need to know the direction of the move. Using weekly options the cost of the trade is kept to a minimum.
PLACING TRADES
I like to take this trade in the 30 year bond options on futures (ZB), and S&P 500 options on futures (ES), but this is because I come from a futures trading background. TLT and SPY options, work just as well. There are many other stocks that will work, check your watch list and see if you can find any candidates.
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Learn how to use weekly options here:
Weekly Options: Increase Your Income Stream
