Liz here, waiting for ice branches to fall on my car! We kicked off the new year here in Baltimore with an unexpected 4-inch snowstorm after a 65-degree weekend. (I love my state.)
My in-laws came over right before the storm and said ominously, “You should do something about THOSE TREES,” and then left. (They are lovely people.) So now I’m just… waiting.
On the bright side, the snow DID neatly cover up the 900 pounds of leaves that we have yet to rake. Instant yard facelift!
New year, new yard, new TRADES.
Today, as previously discussed, we are kicking off Options NASCAR with a cutthroat race between experts… to see who can make you the MOST by Third Friday of this month.
There will be tears. There will be prizes. I don’t know what, but I’mma come up with something.
On a semi-related note, I was watching “Cars” with my child last night and it struck me as really wrong that their headlights are not eyes. Like, why are their eyes on their windshields? What are the headlights supposed to be? Nostrils? Who designed this?
Anyway, it’s Mark Monday, which means Mark gets the head-start in this race with a brand-new IBM trade – one that can make you up to 300% by Third Friday (or so he says).
I’ll be entering the race myself tomorrow, so stay tuned for that.
On your “MARK,” get set, go! (Sorry, I had to.)
Here’s How the Third Friday Race Works
In case you need a quick refresher on Third Friday, that’s the day – every month – when standard equity and index options usually expire. The head options honchos (whom I picture as looking like the Coachman in Disney’s “Pinocchio”) picked this day because it presents the fewest scheduling conflicts (very few holidays are on Third Friday, for whatever reason).
Could it be because this day is CURSED? Surely not.
Obviously, options expire on plenty of other days too (just pull up Yahoo Finance for a quick look) – these might be quarterly options, which peter out on the last Friday of a quarter, or weekly options, which expire every dang Friday. (AK likes to play with these super short-term options – it’s the next best thing to day trading.)
There’s also a quarterly, super volatile event called Triple Witching, where options, index futures, and options on index futures all expire at once. This happens on the third Friday of March, June, September, and December – Mark tracks these events religiously, and often does live events around them, so put them on your calendar.
But each and every third Friday, plain old vanilla options expire – creating a tiny little maelstrom of volatility that could go either way.
And I’m about to pit all our experts against each other in a deadly Third Friday race that will leave blood in the new-fallen snow. (Sorry, I forgot whether this was NASCAR or Valley Forge for a minute.)
Here’s how the mechanics of this will work….
Every one of the guys (and also me, because I give as good as I get) will hand over an options recommendation that they think will make you 100% or better by Third Friday.
If any one of those plays reaches 100% BEFORE Third Friday, we will take off half. (Because we’re not leaving money on the table, obviously.)
We will then leave the other half to run until closer to expiration.
Before the 4pm ET close on Third Friday, we will look at the remaining open positions and see which are set to profit and which are set to end lower, and we’ll send exit alerts accordingly.
THE WINNER will be the expert who clocked the most total percentage gains (including any of the 100% that we took off earlier).
THE RUNNER-UP will be the expert with the highest percentage gain on an open position (or remainder of a position) around expiration.
THE REST OF THEM will just be rotten eggs.
(Obviously, you as a reader will benefit wildly from all this, so I guess really the grand prize winner is you.)
Now that the ground rules have been laid, let’s SHOOT THAT STARTER PISTOL and get Mark out the gate with his IBM trade. (Sorry, I forgot whether this was NASCAR or Pimlico.)
THIRD FRIDAY TRADE #1: IBM
Mark’s short IBM Common Stock (NYSE: IBM). He sent me over a dribbly Moving Averages chart with the comment, “IBM stock has had a nice recovery but is still garbage – poor management.”
IBM’s revenue is down 20%, and net income down 70% since 2014. Moreover, the company just yeeted one of their big revenue drivers – IT infrastructure – out the door, in the form of a new, publicly traded spinoff called Kyndryl Holdings(NYSE: KD). The day Kyndryl launched in early October, IBM’s market cap magically shrank from $127B to $115B.
What’s left at IBM is cloud computing and “global business services,” the sort of thing that people conduct at SNL’s “Business Garden Inn and Suites and Hotel Room Inn.” Amenities include “cereal in gumball machines” and “wet egg.”
(For perspective, consider that IBM’s original peers/rivals are Google and Apple. Are you concerned about IBM spying on you through the smart, connected IBM devices that permeate your home? Didn’t think so.)
Mark sees a shorter-term short here, as well. “Volatility is getting a little juicy ahead of earnings on the 24th,” he said, sending me another chart.
“IV on the 28th contract shows the earnings volatility,” he continued…
And Third Friday options (Jan. 21) are still cheap:
“Skew is steep,” he said. “Jan $132 and $127 puts are both a little over $1. Buy them, and sell at $2, $3, and probably $4.”
You heard it here first – here are a couple of Third Friday plays that can double, triple, or even quadruple (?!) your money in the next three weeks.
So that’ll be two separate Nickel Slots plays. Behold:
Action to Take:
Buy-to-Open IBM January 21, 2022 $127.00 Puts at $1.50 or better
Enter as a Good-til-Canceled (GTC) order
Action to Take:
Buy-to-Open IBM January 21, 2022 $132.00 Puts at $1.75 or better
Enter as a Good-til-Canceled (GTC) order
Assuming my house has not been crushed by a tree full of ice, I’ll be back tomorrow with my own entry into this race (spoiler alert: it’s one stock I love to hate and one I think I could have a short-term fling with).
Hail, Caesar, we about to die salute you! (I forgot whether this was NASCAR or the Coliseum).
P.S. I’ll be working on some type of an official scorecard for you for this race, as well.
January 03 2022