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Volatility is tanking as we head into what's arguably the most important week of this earnings season. This past Thursday, in fact, the VIX notched its lowest settlement of the post-pandemic era and opened below 16 yesterday.
This week, it's entirely possible the volatility index will drop below 14. That's no shot-in-the-dark guess; people aren't buying crash-protecting puts anymore, and volatility is just sort of dying on the vine.
One of the smartest moves you can make at a time like this is to short the VIX via vehicles like UVXY and VXX. I explained how my Money Morning LIVE viewers could do just that during my 10:30 a.m. show.
The volatility trade is certainly a great way to go, but there's really no shortage of ways to cash in in this market right now.
I'm currently looking at three names that seem ripe for big moves, and I've got two trades in mind. Here's what to do...
The Stocks and Trades I'm Watching Right Now
Snap Inc. (NYSE: SNAP) is a social media company with five different products, the most popular of which is Snapchat; it's popular with the kids, and around 4 billion Snaps are sent each day.
That didn't keep Snap's bacon out of the fire last week when a disappointing earnings report hammered the stock, sending it lower to the tune of 25% in a day.
Sometimes, when a stock gets crushed this badly, it's like a "Going Out of Business" sign - this isn't one of those. This is just a rough spot, which makes this a great stock to sell puts on.
There's an interesting move to make here. SNAP Jan. 20, 2023 $50 puts are worth around $14 right now. Selling those could hand you a 25% profit before it's all said and done - modest, but I'll take it. On the other hand, you could end up being assigned SNAP shares which, once this temporary hysteria passes, would be great to own.
Peabody Energy Corp. (NYSE: BTU) has had about as rough a ride as Snap; at this time last week, it was a $19 stock... now it's just above $14. For those of you who've been up on Mt. Everest without cell reception, or who've been sleeping for the past two weeks, coal has been in particularly high demand, and Peabody is the world's largest private-sector coal company. Signs look good that the bottom is in, or soon will be, and this puppy will zoom out of $14 territory like a bat out of hell.
There's an extremely asymmetrical trade to be made on this one, as BTU Nov. 19 2021 $16 calls are trading at a buck right now; these could double before the weather gets much colder.
Last, but by no means least, on my watch list is Vodafone Group Plc. (NASDAQ: VOD). This isn't a super-well-known name in the Americas, though it does have a presence in Brazil and Chile, but over in that other hemisphere, it's a massive telecom player whose logo is splashed across soccer jerseys and skyscrapers.
Some big fish out there made a casual, but massive, VOD trade last week, shelling out $3.3 million on 67,000 VOD April 14, 2022 $17 calls. There was similar flow in September and October contracts, too.
Personally, I don't get it. VOD shares haven't made a convincingly bullish move in months. It hasn't seen the $17 level since early September. I'm not sure this is a trade to piggyback right now.
But... this trade was made for a reason, and it's at least worth our attention - even if we don't dive in headfirst. Watch this stock, then at the first sign of a convincing rally past $16, take a flyer on it.
The bottom line: Earnings season is getting red-hot. There's a lot more going on in the market right now. I'd love it if you'd join us at Profit Revolution, where I just recommended a pre-earnings move on AAPL. I'm constantly looking for asymmetrical, low-risk/high return potential moves in every stock on the market - I'm talking about trades that cost $1 or less in a lot of cases - and finding them for my subscribers every day the markets are open. You can learn how to join us right here.
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