"My Playbook For Election Week" Nate Bear, Lead Technical Tactician, Monument Traders Alliance Hey Gang, I live for this kind of moment. Tuesday brings the presidential election, followed by the Fed interest rate decision on Wednesday. I don't think I'm out of line when I say next week is the most critical test the market has faced since the pandemic. There will be plenty of opportunities…but just as many pitfalls. Fortunately, I've been here before. I successfully traded through the last two presidential election cycles. So I know how to capitalize on this event while minimizing risk. I know it can be a bit overwhelming. And if you're not careful, every tick will feel like an eternity. So, here's my strategy leading into the election and a stock that I plan to trade. Market Outlook In 2016, markets traded down into the election. The day after, the S&P 500 skyrocketed, creating a 38% bull run that didn't end until 2018. 2020's election wasn't as remarkable. Yet, the market bottomed a few days before and then continued another 48% higher through the end of 2021. The VIX is over 20 because investors are hedging their bets for the election and the next Fed meeting. Once we get past next Wednesday, unless stocks crash out, I expect volatility will collapse. And if it's anything like the last two election cycles, that means a nice drift higher to close out the year. However, we're almost guaranteed to get additional volatility. Most traders know this, but they forget to adjust their trading. The easiest way is simply to cut your position size. If you expect volatility to increase by 50%, cut your position size by half. It's that simple. Because when you get those runners, and especially when you trade options, it doesn't take a large position size to deliver big gains. The other way to reduce risk is to go further out in time with your expiration dates. Options that expire further down the road don't move around as much as those with near-term expirations. They do cost more, so make sure to take that into consideration. And yesterday's Profit Surge Trader discussion highlighted a stock that is perfect for this - Oracle (ORCL). Why I Like Oracle (ORCL) I don't like to hold options through a company's earnings announcement. Since we're in the middle of earnings season, that makes it a bit harder to find a good candidate. However, Oracle reported earnings back in early September, and they aren't due to report again until early December. That offers the perfect candidate to try some longer-dated call options. However, we need a setup to work with. And for that, we turn to the charts. Here is the 195-minute chart for Oracle: This chart setup uses my TPS framework which incorporates the following: - Trend - Strong bullish trend that's easy to see. In this case, it's driven by overnight gaps higher.
- Pattern - I want to see price consolidate in a narrowing price range. This tells me that sellers aren't stepping in. So, all we need is a buyers push to send the stock higher.
- Squeeze - When the Bollinger Bands move inside the Keltner Channel, it indicates a price expansion could be imminent.
My sweet spot on this one is an expiration before earnings but after next week's events. So, that would take me to the November 15th expiration cycle. Now, if you wanted to reduce your risk even further, you could go out into the December expiration cycle. But remember, I don't want to hold the option through earnings. So if this hasn't played out within a few weeks, I'd be looking to drop it. | 
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