Even with the afternoon rally, the markets are coming in a little light for traders on Monday.
Aside from speculation on a Tesla Inc. (Nasdaq: TSLA) stock split — so the company can pay a dividend to shareholders — driving some buzz in the tech sector, trading volumes have been lower.
A bright spot for our strategies has been a nice pop in Twitter Inc. (NYSE: TWTR) for Weekly Blitz Alerts…
Sleepy days like this with no trend in the indexes are a great time for options traders to burn up an account.
What happens is a lot of people want to buy options in the opening 30 minutes because they’re excited to get back trading after the weekend…
And when there isn’t much to go on, it’s a lot easier to overreact to a move from fear of missing out — aka “FOMO.”
That’s when you get hit by options premium burn…
How to Avoid Early Week Options Premium Burn
On occasion, you’ll hear some options market veterans call it “Premium Burn Monday.”
It’s not complicated — stock and options need volume to move, and most of that volume happens either at the open or the close.
Traders will jump on a trade when the stock starts to rise and when that volume flatlines, the implied volatility fades with it — meaning those option prices become cheaper.
And if you’re trading weekly options, you’re also going to get hit with some serious time decay.
That’s why I like to avoid the burn and sell premium on Mondays with options spreads using my Point30 strategy.
Last week, Weekly Trade Alliance was able to reel in another max gain on Micron Technology Inc. (Nasdaq: MU) ahead of its Tuesday earnings event!
Analysts expect the Boise-based chipmaker to report earnings around $2 per share — a little over double its results from the same quarter in 2021.
With that information in hand, the Blitz Tracker spotted repeat bearish flow into the name this past week…
But like those puts we saw this past week in Chewy — which also reports Tuesday after the bell — these options were also far out of the money.
As always, if you have to trade choppy markets, know your risk tolerance and stay nimble out there.
P.S. Between the war, rising interest rates and inflation… we’ve seen the stock market whipsaw accounts day in and day out for months now.
We’re sure a lot of people have seen their gains from the past two years RIPPED away in a matter of weeks…
If that sounds like you… it’s not your fault… and you’re not alone.
That’s why for the first time, Joy of the Trade Head Trader Jeff Zananiri is revealing his “Heaters” strategy to the public…