buy weekly options
But with some creative use of weekly options, that doesn't necessarily mean you have to take your losses.
Here's an example of what I mean.
Just under two weeks ago, we suggested a "short iron condor" as a possible short-term strategy for playing the release of first-quarter earnings reports for some of the leading financial stocks, using J.P. Morgan Chase (NYSE: JPM) as a specific example.
As it turned out, JPM's earnings handily topped the estimates - coming in at $1.31 per share versus a projected $1.14, on revenues of $26.7 billion ($24.4 billion had been predicted).
That should have sent the stock nicely higher, giving us a quick gain on our condor - and JPM did indeed try to rally - but then our best-laid plans took a wrong turn.
The broad market turned sharply lower that Friday, with the Dow Jones Industrials dropping 136.99 points and the S&P 500 losing 17.31, dragging J.P. Morgan along with it.
Long story short, over the next five days JPM see-sawed higher and lower - but save for a few moments on Thursday, it never moved out of our $43-$45 maximum-loss range. The trade went south.
But had you been on your toes, you would have noticed this about JPM: In spite of the pressure from a weak overall market, the stock demonstrated strong technical support at the $43-a-share level. Both times it tested $43, it bounced quickly back - a pattern it repeated Monday, when it ignored the broad market sell-off and rapidly rebounded from a lower gap opening near $42.
The rest of this week, it's again traded solidly above $43 a share. In fact, a quick look at the long-term chart shows that - with the exception of Monday - JPM hasn't closed below $43 since March 12th. And, given the healthy earnings and a "powerful buy" rating last Thursday from Zacks Investment Research, it probably won't close below that level again.
At least not in the next week or two...