Trading Energy: Three Ways to Play This Sector’s Strength
Mark’s Watchlist
With oil rising (and DKNG potentially coming back from the dead) I’ve got three stocks to start off our week.
- Draftkings Inc. (Nasdaq:DKNG)
Fool me once, shame on you. Fool me twice, shame on me. DKNG has looked like it’s going to move higher for a while now. But it seems like every time it’s about to get there, it slides lower instead.
The stock is up almost 5% since Thursday’s close. But I want to see one more day of follow through before I jump on this stock. If we see upward movement again today, then I’d consider a short-term swing trade, potentially going long the $52 calls that expire this week.
- Peabody Energy Co. (NYSE:BTU)
We saw strength in energy stocks last week – especially BTU, which is up more than 18% over the past five trading days.
BTU tends to move with a lot of momentum – so, after last week’s big move, I’m looking at the October 15 $17 calls for about $0.75 as an inexpensive play on this energy name.
- BP plc (NYSE:BP)
That last time oil was this expensive, stocks like BP were about 10% higher. So there’s a lot of upside potential here – I see BP heading to $30, $31, maybe even higher. And I’m looking at the November 19 $28 calls for about $1 as a cheap way to get a pretty nice return.
VIX Traffic Light
We’ve got a yellow light situation today…
But I’m looking further ahead than just this week when I say that.
Next week, however, marks VIX expiration, which could see volatility shooting higher…
And the S&P selling off all the gains it makes this week. I’m looking at putting on some sort of put protection on Friday to protect my portfolio from next week’s potential volatility storm – and you should too.
Today’s Impact Money Trade
We aren’t the only ones interested in playing off of the oil and energy sector’s strength today.
Someone is kicking off the week with 2,000 contracts in a single energy name, dropping $270,000 on a bet that the stock will jump $3 higher by November.
And I’m right there with them. The Energy Select Sector SPDR Fund (NYSEARCA:XLE) has had a great month. The oil and energy ETF is up more than 13%!
So, how is this big money trader playing the potential upside?
This trader just bought 2,000 of the NextEra Energy Inc. (NYSE:NEE) November $82.50 calls.
That’s a $270K bet that NEE will get above $82 by November. And based on how this sector is moving, well – I can see it.
I think there’s more room to run in a lot of these names… NEE and BP being two of them.
You may have noticed some cool charts I used here to display our top stocks of the day.
Every chart I showed you today came straight from my newly-finished Asymmetric Trading System!
You can do more than simply look at a chart though. Take XLE, for example.
We can pull up a variety of indicators on the ETF – here it is with my favorite, the IV/HV blend.
How about volume profile? We’ve got that too:
Not to brag, but you can add any of these indicators to any stock or ETF on the market:
And you can have 24/7 access to this system.
See it in action right here – and learn how you can use it yourself.
To your success,
Mark Sebastian
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One response to “Trading Energy: Three Ways to Play This Sector’s Strength”
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October 04 2021
Thank you very much, Mark. Great!!