It’s another wild start to a wild market.
After another series of massive swings in both directions, the Dow is up another 290 points today, taking us back above 18,000. Unfortunately, we’re running right back into overhead resistance again where we’ve failed every time.
If we can push through this time, that’s great. But there’s nothing real noteworthy to keep us elevated. It’s why we’ve been a little hesitant to issue a lot of new trades lately. Up and down moves in this market aren’t sustainable, causing a lot of craziness in the trading pits.
I did find an interesting trade set up today, though.
Shares of Dreamworks Animation (DWA) gapped higher this morning on great movie sales for Home. But one good movie doesn’t mean anything. We’re likely to see a quick pullback in the name once this movie sales excitement dies down. It’ll be much like a death of news trade.
There are two ways to trade this.
One, we can just buy a put option on the death of news. Or, we can buy one call for every two puts in case there’s near-term continuation of trend here. What I’d like to do is profit from both the put and call here.
Let’s be honest here. The success of one movie isn’t going to sustain a trend for long.
Buy one call for every two put options you buy…
Consider buying to open the DWA May 2015 24 call up to $2.
Consider buying to open the DWA May 2015 24 put up to $2.
Hold all other positions for the moment. This crazy market has to pick a direction already.
Ian L. Cooper
Inside Value Trader