Weekly Options Recap 10/23/20

As we wrap up the week we are still waiting for an announcement on the stimulus plan in the works. Markets have been looking for more direction but instead we are left no close to a deal today than when we started the week. The trouble is we are seeing very low volume trading due to the wait and see approach that many trades are taking.

Next week we do have other events that can shake things up. We have earnings out of tech names like AAPL, AMZN, FB, GOOGL, MSFT. All of these have the potential for a monster move on the Nasdaq. We won’t be active on these stocks before the earnings numbers but will be looking at them after the news is out.

SPY has continued to hold the 20 SMA and 20 EMA as support this week. We tried breaking through them yesterday but found quick support. 342.00 is support on the downside going into next week with resistance up at 354.00. We would like to see volume pick up on any break higher or lower next week to confirm the move.

Volume over the past week has been stuck between 50-70 million shares on SPY. We would like to see this number closer to 100 million shares. That will make it much easier to see follow through on the directional moves as well as allow us to get better fill prices on our trades.

The key to trading these markets right now remains managing risk. We continue to focus on taking a more conservative approach. This has us using smaller position sizes (50-75% of our normal size) along with using more vertical spreads. Should we get price to break out of this range that we have been stuck in the last few weeks we are more than willing to ramp things back up. That could potentially happen next week after the big tech earnings.

In this week’s Weekly Options Recap video we cover some of our trades from this week including our Overnight Pop trade that we closed out of today for a profit on QQQ. We also take a look at new trades that are setting up for us going into next week on SPY, QQQ, SNAP, SFIX, DKNG, XLE, and XLF. Take a look and let us know if you have any questions. Mike@netpicks.com.

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