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June 9th, 2024 | Issue 237 |
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Last week, Dell's earnings report was a real rollercoaster, reminiscent of the recent volatility seen with CRM and NVDA. The market had anticipated a big move—about 15%—driven by a large open interest at the 140 put strike. With the earnings report highlighting strong revenue but disappointing margins, especially in their infrastructure services, Dell's stock took a sharp 21% dive. Amidst this volatility, I saw an opportunity to deploy a put butterfly strategy. For those not familiar, a put butterfly is an options strategy designed to capitalize on significant price movements with minimal cost. Here's how it works: you buy one put at a higher strike price, sell two puts at a middle strike price, and buy one put at a lower strike price. This setup limits both potential risk and reward, making it a cost-effective way to bet on volatility. |
Here's the trade I executed: - Bought 1 put at the 150 strike
- Sold 2 puts at the 140 strike
- Bought 1 put at the 130 strike
This arrangement created a balanced position that would benefit from Dell's anticipated volatility without requiring a massive initial investment. When Dell's stock plummeted after the earnings report, the put butterfly performed exactly as planned, providing a profitable return from the significant move. Interestingly, Nvidia also felt the impact, despite its strong performance throughout the year. Dell's report underscored Nvidia's dominance in the AI hardware market, yet the stock dipped slightly in response to the broader market reaction. This trade was a perfect example of the importance of being a versatile trader. Keeping a close eye on market conditions and being ready to adjust strategies as needed is crucial. It's in these moments of adaptation and execution that I feel most accomplished. My AI models were instrumental in this process, sifting through data and highlighting the significant open interest and volatility indicators that led to the decision to implement the put butterfly. As traders, we constantly strive to read the market correctly, adjust our strategies, and execute trades with precision. The Dell earnings trade showcased these skills and the effectiveness of a well-chosen strategy, reinforced by AI-driven insights. It's trades like these that reaffirm the importance of staying informed, adaptable, and prepared for whatever the market throws our way. Let's continue to stay vigilant, leverage our tools, and make the most of every trading opportunity. |
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Chief Investment Officer/Founder |
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Following our deep dive into the technology sector, it's time to focus on a specific stock that presents a compelling buy opportunity based on the current market conditions and recent economic data. This week, our spotlight is on Amazon (AMZN). |
Amazon Inc. (AMZN) is a global e-commerce giant, but its influence extends far beyond online retail. With significant ventures into cloud computing (AWS), artificial intelligence, and digital streaming, Amazon is a powerhouse of innovation and growth. The company's ability to diversify and dominate multiple sectors makes it a robust candidate for investment. Click here for access to the Power Trading Live Strategy Roundtable Recorded every Thursday. Market Conditions Favoring Amazon - Bullish Outlook: The growing bullish sentiment in the market, driven by strong earnings and easing inflation, creates a favorable environment for tech giants like Amazon.
- Recent Performance: Our Dynamic Power Trader (DPT) model has identified extreme demand for call options on Amazon, indicating strong investor confidence.
- Tech Sector Surge: With the tech sector reaching new highs and showing resilience, Amazon is well-positioned to benefit from this momentum.
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Based on the current trading landscape and our AI-driven insights, buying Amazon (AMZN) this week is a strategic move. Our latest analysis suggests that Amazon is poised for growth, supported by strong demand signals and a favorable economic backdrop. By focusing on Amazon, traders can leverage the overall bullish trend in the tech sector and capitalize on one of the market's most dynamic and influential companies. This week, I'll be adding Amazon (AMZN) to my portfolio! |
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| Vlad Karpel
YellowTunnel and Tradespoon Founder |
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P.S. Click here for access to the Power Trading Live Strategy Roundtable Recorded every Thursday. |
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DISCLAIMER: Vlad and his team may have a financial interest in the picks as they trade many of the same equities and options they pick. Vlad Karpel and YellowTunnel (Company) is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. All investing strategies are made available to the general public on a regular basis. We do not provide personalized financial advice or investment recommendations. As an investor, you know that any kind of investment opportunity has its risks. There is no such thing as low-risk stocks and we recommend you invest wisely and that only risk capital should be used to trade. Investing in Stocks and Options is highly speculative. No representation is being made that the use of this strategy or any system or trading methodology will generate profits. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed here and on our website. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE SUCCESS: It should not be assumed that the methods, techniques, or indicators developed at YellowTunnel will be profitable or that they will not result in losses. Nor should it be assumed that future picks will be profitable or will equal past performance. All of the content on our website and in our email alerts is for informational purposes only and should not be construed as an offer, or solicitation of an offer, to buy or sell securities. Remember, you should always consult with a licensed securities professional before purchasing or selling securities of companies profiled or discussed on YellowTunnel.com. Performance results that are discussed above are from the Live Trading Room. Multiple YellowTunnel tools were used to achieve these results. Trade % Gain/Loss is calculated by dividing the $ Gain/Loss by the Max Risk, which is the posted Stop Loss for the trade. Yellow Tunnel's performance data represents the average return on all trading recommendations from January 1, 2020, to today. *Win rate percentage reflects the average that Yellow Tunnel's software helped me identify a profitable investment strategy.** Triple-digit returns are not typical and are not intended to reflect the likelihood of similar returns in the future. |
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