January Options Expiration Is Next Week

By Jeff Brown on January 9, 2017

Overall, last week was a great week for our credit spreads. Our five January expiration credit spreads are all looking strong. Expiration is next Friday, January 20.

We also issued three new recommendations, which still have potential if you were not able to place the orders last week.

The market was quiet, and market volatility is at historical lows again. Generally, this is good for the existing credit spreads, but we’ll likely see more volatility during the next week. There is only one position that we need to keep a close eye on: the SVXY credit spread. But I do expect that to pull back into safer territory.

So, we’re in a great position for expiration next week.

Jan 2017 $80/$85 bear call spread on Skyworks Solutions (SWKS)

The semiconductor company went nowhere last week and remained right around $75. That’s perfect for our trade, as it’s $5 under our short call strike price. The stock has been trading between $74 and $78 over the last four weeks or so. Range-bound trends like this are great for credit spreads, as the time decay eats away on the option value.

This credit spread is performing as planned and is now a HOLD.

Jan 2017 $30/$25 bull put spread on VanEck Vectors Junior Gold Miners ETF (GDXJ)

This credit spread is working in our favor. The ETF, which holds a basket of junior gold exploration and mining companies, dipped below our short option strike price of $30 for a few days. But as we predicted, it bounced back strongly to almost $37 at the time of this writing.

GDXJ is approaching its 200-day moving average, which will be a strong resistance point, but gold has a lot of momentum right now.

This credit spread is performing as planned and is now a HOLD.

Jan 2017 $100/$105 bear call spread on Caterpillar (CAT)

The global manufacturing powerhouse started the year trending a bit lower last week. Momentum and strength are very low for this stock right now, and this is great for our credit spread.

We have a lot of cushion now between the current price and the short strike price. I expect to hold this position through expiration.

The CAT bear call spread is a HOLD.

Jan 2017 $78/$83 bear call spread on SPDR Energy Select Sector ETF (XLE)

While oil continues to hang in there and show some strength, our credit spread on XLE continues to improve. XLE pulled back a bit last week and is now trending lower.

XLE has traded in a tight channel, between $75 and $77 since the middle of December. As far as we’re concerned, it can stay there. That will allow our position to expire worthless, enabling us to retain 100% of the profits.

This position remains a HOLD.

Jan 2017 $105/$110 bear call spread on the ProShares Short VIX Short-Term Futures ETF (SVXY)

While the quiet week was great for our other positions, the Volatility Index (VIX) dropped back to the low level it was when we put on the original credit spread. This caused SVXY to jump during the last week.

With the VIX scraping along the bottom right now and SVXY back in overbought territory, I believe that we’ll see a sharp correction sometime this week. We are watching this position closely, but I do expect a pullback.

We’ll send out an alert if we feel there is a need to close the position early, but for now, we’ll hold.

The bear call spread on SVXY is now a HOLD.

Our Three February Spreads:

Feb 2017 $116/$111 bull put spread on the iShares 20+ Year Treasury Bond ETF (TLT)

Feb 2017 $115/110 bull put spread on the iShares PHLX Semiconductor ETF (SOXX)

Feb 2017 $130/$125 bull put spread on the Russell 2000 ETF (IWM)

Nothing has changed with these positions since we recommended them last week. Right now, our TLT, SOXX, and IWM spreads are showing small gains. But these positions have a little volatility, and if you can still get in for the recommended credit or greater, go ahead.

TLT is still a recommended trade if you can receive a net credit greater than $0.75.

SOXX is still a recommended trade if you can receive a net credit greater than $0.85.

IWM is still a recommended trade if you can receive a net credit greater than $0.59.


Jeff Brown
Editor, Four Point Trader

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