idea icon

Options Trading Ideas – 4.1.2020

VIX is very high right now and trading VXX and UVXY alone seem to be a pretty dangerous thing to do (at least from my own perspective). I decided to venture out and looked for some ideas that could also benefit from the higher VIX. In other words, I looked for ways to profit from the high VIX by selling Call or Put (or selling Call or Put spread).

Do you have any good options trading ideas to benefit from the high VIX? Please share it in the comment section below.

1) Short Japanese Equities ETF

Reason

Covid-19 cases in Japan have been relatively lower compared to other counties despite the fact that it was one of the Asian counties that reported its first Covid-19 case relatively early on after the outbreak.  There are different theories about why the cases are lower (cultural behavior, not testing enough people, hiding something because of the Olympics, etc).

Having lived in Tokyo many years ago, I understand how crowded it is and how it is so difficult to commute or go anywhere without getting in contact with other people. So it’s puzzling how the reported cases in Tokyo could be so much lower compared to a large city such as New York. Likely the worst is yet to come. Looking at how the US stock market reacted to the outbreak in the US, shorting EWJ seems to make sense.



Trade Execution

Looking at the weekly chart, 50 seems to be the resistance level.

Sell April expiration 50/49 bear call credit spread.

EWJ Weekly 4.1.2020

EWJ Weekly Chart

2) Long USO

Reason

Crude oil is at an all-time low thanks to the ongoing oil war. This idea is based more on technical analysis.

The weekly chart shows it is still in a declining trend but the weekly chart showing the divergence between the price and MoneyFlow / RSI oscillators.

Trade Execution

It likely won’t stay below $4 even if it goes below that in the short term.

Sell April expiration $4 strike naked Put. Expecting it to expire out of the money. Even getting assigned, expect USO price to go above $4 soon.

USO weekly 4.1.2020

USO weekly chart

 

USO daily 4.1.2020

USO daily chart

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *