The market bottom seems to be getting priced in more and more quickly as time goes on, and this leads to some serious opportunity, but also some level of concern. Is the market getting too complacent with the potential risk of a recession or other fundamental input?
The great thing about the market predicting continued calm quickly is that it can generate some great opportunities to leverage a directional trade and define the risk with options. And if the market wants to truly show signs of calm, I’d imagine it may need to do so with higher prices, which gives me a possibility of bullish opportunity.
Just looking at the broad market with the S&P 500 helps illustrate why the market is getting less concerned:
Monday’s price action was very supportive of the bull market, as we’re now back above the 200-Day Moving Average. The intra-day ranges are tightening up drastically from what we were seeing in weeks prior, and the options market is pricing in an expectation of much less movement going forward.
To see this, we can simply look at the VIX, which shows the implied volatility of the S&P 500’s options expiring in 30 days:
The VIX is nearing levels that we saw with the market at highs. And yet, we’re still much closer to lows than highs. Is the VIX getting ahead of the market here as an indication of a market that needs to go back into a bull trend? Is it mispricing the potential downside risk in case of a new fundamental input?
Perhaps, but with the VIX low, I know I want to find an opportunity that I can leverage a directional move, and given everything I’m seeing, I am going back to technology as a potential bull market leader, and more specifically, into cyber-security. From what I’m seeing, there seems to be an opportunity brewing in FTNT:
FTNT is pressing against the 50-Day Moving Average, showing strong leveraged upside potential, and on top of that, I’ve got AI signals showing me that now may be the time to buy. With all of that and the defined risk and leverage of the options market with the VIX significantly off highs, this seems like the right time to look for a leveraged call option position.
If you want to learn more about utilizing AI for predicting dynamic markets and the incredible opportunities that can be captured utilizing state-of-the-art technological advancements in trade recognition, just send me an e-mail and I’m happy to talk through the leveraged opportunities that I’ve historically identified by combining AI and options analytics!
And as always, please go to http://optionhotline.com to review how I traditionally apply artificial intelligence, technical signals, volatility analysis, and probability analysis to my options trades. And if you have any questions, never hesitate to reach out.
Keith Harwood
Keith@OptionHotline.com
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