Trade Alert: Energy, Power, And Strategic Materials
Bullish options bets on one of our Top Names from last night and on four of our Market Watchers names.
Why We’re Entering Multiple Trades
One reason we’ve been entering several trades per alert lately is simple: in this market, the right themes can rerate quickly.
We saw that recently with some of our space-related trades. In Trading Spaces, we noted how several space and AI-adjacent names had already started moving as investors connected them to larger themes.
That’s the logic behind using a basket of trades when the setups are there. We don’t know in advance which name will rerate first. But if several names sit in the right themes, pass our screens, and give us attractive options pricing, it makes sense to take more than one swing (of course, we’re also automatically exiting trades too, as our pre-set exit orders fill).
Going Back To The Well
A couple of today’s trades fit that idea in different ways.
One is a second swing at a name we tried to enter yesterday, but didn’t get filled on at the price we wanted. A mulligan is reasonable here since the setup still works.
Another is a previous winner for us. And in a third case, we already have a deep-in-the-money trade on the same name.
We’re not going to avoid previous winners just because they’ve already worked. If the story is still intact, the theme is still live, and the stock is back in our Goldilocks zone—not overextended, but not breaking down either—we’re willing to go back to the well.
Using Volatility To Our Advantage
Another reason we like these setups is that volatility can work well for us now.
Without getting into the details of the options structures here, the basic idea is this: in several of today’s trades, we’re able to finance bullish exposure by selling volatility well below and well above the current stock price.
That gives us a useful combination: bullish exposure, defined risk, and room for the stock to breathe. We’re using the options market to shape the risk/reward.
A Methodology Upgrade
Thanks to subscriber A., we’ve also made a small upgrade to how we calculate the fair value of these structures.
We had already been using CBOE implied volatilities rather than broker-screen IVs. Going forward, we’ll continue using CBOE IVs as our preferred input, while keeping Black-Scholes as our fast baseline. We’ll also add American-style option checks using Bjerksund-Stensland and, when needed, a binomial tree model.
For most of today’s trades, the difference between the models was only a few cents. Where there was a difference, we used the more conservative figure. The bigger point is discipline: We’re trying to enter these trades at prices that are attractive relative to modeled fair value.
Today’s Five Trades
Today’s alert gives us a mix of energy services, power and data-center infrastructure, strategic metals, and optical / semiconductor-materials exposure.
That mix is intentional. The AI buildout is not one trade anymore. It touches chips, power, materials, optics, cooling, networking, energy, and industrial infrastructure. Our job is to keep finding names where that theme overlaps with objective screens and attractive option pricing.
If they fill, great. If they don’t, as in the case of one of these names yesterday, we’ll wait for the next pitch.
Today’s Top Names Trade
Energy services / digital oilfield theme
