Friday's outsized trading range and wicked intraday bullish reversal were the latest evidence of the obvious - volatility has seized the marketplace. With the CBOE Volatility Index (VIX) now perched in the low 20s, traders have to adjust expectations and tighten their seatbelts, or else bumps and bruises are sure to follow. Fortunately, there are many options trading strategies designed to profit amid such turmoil.
Indeed, many options trades offer higher payouts in such volatile times.
In selecting which stocks to target, we're going to focus on those that have remained resilient despite the ongoing rampage. One is a momentum stock, beloved by all. Another is a steel stock buoyed by the tariff talk. And the final one is a best of breed bank flashing a tasty buy-the-dip setup.
Behold, three trades for a volatile market.
3 Options Trading Strategies for a Volatile Market: Netflix, Inc. (NFLX)
We begin with Netflix, Inc. (NASDAQ: NFLX ), which arguably needs no introduction. The entertainment titan scored a mouth-watering bullish engulfing candle on Friday that propelled the stock to yet another new all-time high. Volume accompanied the surge showing buyers were anxious to take a bite. NFLX has boasted relative strength for months now and held firm during the last two market downturns. During last week's rout, NFLX barely budged at all.
There's no need to fight the Street here. Embrace the strength and deploy an options trade. We suggest buying the April $300/$320 bull call spread for around $9.00.
3 Options Trading Strategies for a Volatile Market: Nucor Corporation (NUE)
While large-cap stocks bore the brunt of the tariff-talk fallout last week, metal stocks like Nucor Corporation (NYSE: NUE ) were understandably bid-up on the protectionist chatter. And that's making bullish options trading strategies intriguing here.
The price action for NUE is compelling. The past two weeks of consolidation have taken place above a rising 20-day and 50-day moving average. Pattern-wise, we have a bull flag that's providing a clean line in the sand to use as the entry point. Trendline resistance sits near $68, so that's the zone to watch. If Nucor shares can pop above that, bullish options trades are worth a shot.
Buy the April $67.50 calls for around $3.00. NUE stock options are illiquid, so limit orders are a must here.
3 Options Trading Strategies for a Volatile Market: JPMorgan Chase & Co. (JPM)
JPMorgan Chase & Co. (NYSE: JPM ) rounds out today's trio with an interesting pullback setup. Despite the retreat, JPM stock's long-term trend is still pointing higher. It's been one of the better bank stocks and was able to notch a new high during February's rally. The broader financial sector, by the way, was unable to reclaim its peak. Friday's trading session ended with a bullish hammer candle right at the 50-day moving average which shows buyers were out in force defending their turf.
JPM is down slightly in early morning trading Monday. Watch for a break above Friday's high, then sell April bull put spreads. Implied volatility is elevated making credit spreads more attractive. Sell the Apr $105/$100 bull put spread for around 65 cents if the stock triggers.
As of this writing, Tyler Craig didn't hold positions on any of the aforementioned securities. Want more education on how to trade? Check out his trading blog,Tales of a Technician.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.