Three Ways to Trade Robinhood

Portfolio Action: Close UVXY

Let’s kick off the day by pocketing a profit on our UVXY August 6 $30 put.

This trade had a rough go of things for a bit – but today, it’s up about 20%, minimizing our loss. With expiration coming tomorrow, let’s take our dollars and move on.

Here’s what to do:

Sell-to-Close UVXY August 6, 2021 $30 put at market.
We still have another UVXY put open in the portfolio – the January 2022 $20 put. You can track that trade’s performance right here on the Profit Takeover portfolio.

Now, let’s get to today’s trading action…

Three Ways to Trade Robinhood

Robinhood Markets Inc. (Nasdaq:HOOD) has been on a tear since its IPO last week. And just yesterday, the company finally listed options on the stock.

Originally, these options only went up to a $70 strike. But as HOOD continued powering higher, hitting $85 at one point, strikes were listed all the way to $95.

Now, the stock has taken one of its first hits after HOOD announced that about 100 million shares would be sold to the marketplace in the next couple of weeks.

On the announcement, the stock fell over $7 at this morning’s open:

HOOD, courtesy of stockcharts.com

But this stock is going to get bought back up fast – and there’s a ton of money to be made trading HOOD options.

Now, I’m not talking about simple calls and puts. Because here’s the thing – HOOD options have a ridiculously expensive vertical call skew. That means calls are more expensive than puts, and out-of-the-money (OTM) calls are more expensive than at-the-money (ATM) calls.

Because of this, I wouldn’t recommend buying straight long calls right now.

1. Selling Covered Calls

Because of HOOD’s crazy expensive call skew, selling calls against the stock is a no-brainer. Simply buy HOOD stock and sell calls against it, raking in the high options premium on HOOD calls right now.

You can learn more about selling covered calls right here – I broke down this strategy a few weeks ago.

2. Call Spread

Remember – the OTM calls are more expensive than the ATM calls in HOOD right now. So, to limit your risk on a bullish play, you could look at a call spread, or buying one call and selling another with the same expiration date but a different strike price.

I’m looking at the August $65-$95 call spread for around $7.00. That’s buying the $65 call while simultaneously selling the $95 call. I think this spread could pop to $14 or $15 tomorrow, and then I’d bail before a sell-off gets swept up due to the “memeness” of this stock.

3. Short AMC/GME

So it looks like money is flowing out of the old meme kings – AMC Entertainment Holdings Inc. (NYSE:AMC) and GameStop Corp. (NYSE:GME) – and into HOOD.

That’s right. Those Robinhood users that pushed AMC and GME to sky-high levels earlier this year? They’re back – but they’re moving their money into the “motherland” stock and buying HOOD itself.

I think that AMC could drop to $20 by the end of the month, and GME down to $100. So while you’re long “the hood,” I’d look at going short GME and AMC.

VIX Traffic Light

Yesterday, the S&P closed down around 20 points lower.

And the VIX, which should have moved inversely with the S&P, closed about 4% down.

This is why my VIX light remains yellow today. We’re still on high alert. I’ll need to see a few days of the VIX and the S&P following the pattern they’re supposed to before my VIX light moves back to red.

Mark’s Watchlist

1. CVS Health Corp. (NYSE:CVS)

Yesterday, CVS fell on reports that the company would raise wages for employees instead of raising dividend payments for investors. But now, I’m looking for the stock to recover over the next month.

The September $85 calls for $1.10, in fact, are a great, cheap play on a short-term recovery.

2. Advanced Micro Devices Inc. (Nasdaq:AMD)

AMD has been exploding higher the past several weeks, and at some point this name is going to lose some steam.

I’m waiting for a day when AMD starts to lose some IV. See, right now, IV is high as the stock has barreled higher. But once the stock doesn’t have a crazy day, IV will get crushed. And that’s when I’ll get in for a short-term bearish play.

By short-term, I mean 1-2 days, because this thing could head even further into uncharted territory in the long-run.

3. Apple Inc. (Nasdaq:AAPL)

Yesterday, I told you about big money flowing into AAPL to the tune of $16 million.

Well, that $16 million has become almost $30 million now, as who is likely the same buyer has poured another $12 million into this straddle:

Click To Enlarge
That’s a ton of money betting that AAPL will move 12 bucks between now and October, and I would not want to be on the other side of this trade.

AAPL is going to break out. My gut says it will be lower, but this thing could explode higher. Either way, this customer is betting on a move.

4. Uber Technologies Inc. (NYSE:UBER)

A ton of paper has poured into UBER over the past couple of days leading into yesterday’s earnings report, which beat analyst expectations.

Now, I’m looking for UBER to make a break above $41 – and I’m searching for a short-term call option expiring tomorrow to play the quick recovery.

Tomorrow, I’m going to end the week by answering a round of Profit Takeover reader questions – and I want to hear from you.

Please send me a question right here about anything trading-related, and I’ll do my best to answer it for everyone.

Until then,

Mark Sebastian

---

Comments