One of my many strategies is to look for momentum stocks as they approach earnings. There is usually a higher interest in a stock as it is approaching an event especially earnings.
Take for example TWTR. Hurt by having to censor the exPOTUS and others spreading false news, TWTR hit a relative support level around $45 last month before the inauguration.
As each week of earnings approached, you can see a movement towards a higher high and a higher lows on each pullback. But for 3 straight weeks there were relative gains in TWTR from $45 all the up to $60 today right up until earnings release. How can you profit off this movement? A Feb 19 call ATM $45 would have been $3 on 1/19. Today that same call would be worth: $15+. A 400% return.
Would you have had the conviction to pull the trigger back in January and buying all the pullbacks and holding? Would you have bought 1/3, 1/3 and 1/3 on the way up? What would your position and size be and where would you play your stop loss as the stock advanced? These are questions you need to answer as you form a plan for a big harvest. Momentum is seasonal. It will change. Will you be ready to plant the seeds and tend the weeds as you prepare for the big harvest?
Options Harvest will help you develop a plan:
- Till the land: Find momentum stocks
- Plant your seeds: Enter your initial positions (buying at supports and pullbacks)
- Wait/Weed: avoiding YOLO and FOMO and developing a stop loss
- Harvest the fruit: Understanding sell levels (areas of resistance, when to sell)
May the God of the harvest bless you richly.
