With such a curve ball market I thought it was time to mix it up with a curve ball trade: A Call Debit Spread. Subscribers are used to seeing credit spreads so this debit spread was a curve ball to many them.
This debit spread on the QQQ is deep ITM and profits as long as the Q's stay above the short strike of the spread; approximately >5% below today's close. I expect the following to happen to generate profit:
1.) volatility to decline through the Thanksgiving trading period,
2.) the market to find some footing in the current trading area, and
3.) the market to bounce as it is very oversold.
This debit spread is poised to profit faster than a credit spread during the same period (I anticipate a 1-2 week hold time) if any of the 3 expectations above come to fruition. More importantly, this debit spread provides more attractive adjustment possibilities than a comparable credit spread as the short strike be closed (bought back) leaving the long strike in tact in the event of further pullbacks. In that scenario, the remaining long strike would benefit exponentially from any market bounce (remember, the strongest bounces occur during down markets), thereby maintaining the profit profile while mitigating the risk of the position.
Today's market, and this trade, exemplify the fact that a trader must always be searching for opportunities in the market. Stick around and stay tuned.....Thanks!
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Navigate wisely and stay profitable, my friends. Happy trading!
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