We have seen an incredible start to 2019 with markets rallying in a big way since Christmas. We have some names up 20-50% just in the last few weeks! As a result we are looking at market that are extremely overbought. While this doesn’t mean markets have to stop moving higher, it does mean odds favor a pause in the near future.
One of the overbought names that we are looking at for this week’s Options Trade Of the Week is CMG. The question becomes what makes the CMG chart overbought? We have created a tool called the Pulse indicator that helps quickly identify whether a market is overbought or oversold. In the video below you will see a demo showing how we use this indicator on a regular basis. It’s another tool that helps put the odds in our favor long term and also shortens the amount of time required on a daily basis to look at the charts.
For this week’s Trade Of the Week we will be looking at selling a call spread on CMG using the Feb 1 weekly options with 16 days left to expiration. We will be selling the 527.5/530 call spread for $.80 or $80 per spread. This has us selling the 527.5 call and buying the 530 call at the same time to make sure we are in a risk defined trade.
For a complete break down of our Trade Of The Week make sure you review the video below. We will cover the details of how we are placing trade trade including how we plan on managing it from start to finish. Feel free to contact me directly with any questions you might have. Mike@netpickstrading.com