A $2 trillion company just priced in a crash to the upside.
Go a week or 2 out in its options chain and you’ll see what I mean. The calls are pricing in a bigger move up than the puts are pricing in a move down, and in a company this size, that is just wild.
Normally it runs the other way. Puts cost more because people pay up to protect themselves from a crash, and calls cost less because stocks usually grind higher.
Traders call this an inverted implied volatility skew, and it’s not something you see in everyday markets.
I don’t think it lasts. There’s going to be a day, probably this week or next, when you see sell side activity in the tech names that have been carrying this market, and when that happens, money rotates back into the rest of the economy.
I just walked through 3 trades on Schwab Network, with the charts and the exact spreads I’m using:
- A stock that hit the same level twice, reversed hard, and has its technicals in what I’d call a horrific stance. I’m playing it to the downside.
- A beaten-up name sitting right on a big round number that I think holds, especially if that rotation out of tech shows up.
- One that’s in the middle of a gamma squeeze, where call buying forces the market makers to buy stock and feeds the move. I’m riding the lightning on that one.
I didn’t put the symbols in this email. Watch the charts first, then decide if the trades make sense for your account.
To your success,
Don Kaufman
P.S. Tomorrow at 2pm Eastern, I’m giving $2,000 in cash to one person on my livestream. You have to be on it to win.
