The Profit Column: A Grand Tour of Options360
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Since we started publishing it last month, it’s been all about speaking to the investment experts in our network and highlighting a big profit they recently made for their subscribers.
We’ve talked to Andy Swan about his social-media-powered earnings season strategy. Jason Bodner about his optimistic but rational growth-stock outlook.
William McCanless about his knack for profiting off short-term stock market plunges. And Mike Burnick about his four-pronged options income technique.
Worry not – this tradition will continue. And with a special surprise next week.
But this week, we’re switching things up a bit…
You see, TradeSmith is unique in that it’s made up of more than respected investment experts who publish their best ideas to subscribers.
It’s also host to a long and growing list of best-in-class trading tools, which you can use however you see fit to make the most of every trading day. (It’s in the name… TradeSmith. Like a master blacksmith, we create incredible trading tools envied the world over.)
These tools are wholly proprietary, powered by TradeSmith’s vast datasets and sophisticated, A.I.-driven algorithms. They’re not the same old chart indicators you’ll find on Stockcharts.com or TradingView. In fact, I’ll just accept the risk of sounding like a marketer and simply tell it how it is: You cannot get these tools anywhere else.
As trading becomes an ever more important skill to learn as we carry on through the 2020s, having these tools on your side will be critical.
But the nature of these tools, as closely guarded research reserved for our paying subscribers, means it’s hard to test-drive them firsthand.
Well, today I’d like to change that.
I’m going to demo the suite of tools that comes with Options360, so you can get a full view of what you’ll get to use every day if and when you decide to become a member…
Options360: The Grand TourOptions360, as the name implies, has you covered from all angles on everything you can do in the options world.
It’s a robust product, with a ton of features and ways to use it. We’ll demo some of the most popular features today.
First, I want to show you the Opportunities screen. This tool helps you find the highest-potential options trade ideas for a number of strategies, in an instant.
For example, say you’re bullish and want to buy calls. You’ll go over to this section and filter for the “Buy Calls” strategy. You’ll immediately see the top opportunities in the market as determined by the Options360 algorithm:
Clearly, the algorithm indicates we should be bullish on energy stocks going out several months here. We have Hess (HES), Phillips 66 (PSX), ConocoPhillips (COP), and Occidental Petroleum (OXY) all flashing long-call signals. (I’ll have some thoughts of my own on energy stocks in tomorrow’s piece.)
But the Probability of Profit (POP) algorithm (more on this in a bit) is pretty neutral on these trades – about 50/50 odds.
So let’s keep going. What about an income strategy like selling put options?
Here, too, we can find opportunities without leaving the page…
Here are the four top-ranked put-selling opportunities identified by the Options360 algorithm right now.
Let’s take a closer look at the Trade Summary for that third card, on Super Micro Computer (SMCI).
This might be my favorite part of the Options360 software…
For each recommendation, you can see the best scenario for the trade, the worst scenario, and the probability of each.
Our algorithm sees an 83% chance of SMCI closing above $206.70 at the Dec. 15 expiration, which would result in keeping the entirety of the $3.30 premium earned for selling the $210 put option. That’s the best-case scenario.
We can also see the worst-case scenario – where SMCI closes below that price by expiration, and you’re assigned 100 shares of SMCI per contract sold at a cost basis of $206.70 ($210 minus the $3.30 earned for selling the put.) While we call this the worst-case scenario, the result is that you own SMCI stock at a discount to its market price. And our algorithm predicts just a 17% chance of that happening.
If it does happen, you could simply sell the stock again and move on to the next trade… or try out another powerful strategy – selling covered calls.
This is when you sell call options on stocks you own to generate income. Just like put options, you keep the premium if the option expires worthless. If the option is exercised, you’d sell your shares at a price you previously determined.
The Options360 Screener has you covered for that strategy, too.
Let’s take a look at a few of the top “buy-write” covered-call-selling trades in the algorithm…
All of these trades offer high profit potential, with both a high chance of success and a low risk of loss, as determined by the Options360 algo.
OK, whew…. That was a lot at once! How are you supposed to keep track of this many opportunities?
That’s where the Most Valuable Email comes in…
This email automatically curates the top-ranked opportunities to trade options for income every single week.
Here’s a look at the one we sent on Monday, Nov. 6…
(Note that these trade recommendations are a few days old now – I wouldn’t recommend rushing out to trade these on Monday morning. The ones I shared earlier are more recent, but as always with the options market, do your due diligence and never risk more than you can afford to lose.)
Whether you’re new to options or have traded them for years, the weekly Options360 opportunities email is rich with value. It’s like getting a best-in-class trading plan delivered straight to your hands every single Monday at noon Eastern.
This single email is responsible for enriching the lives of countless Options360 subscribers. (I won’t get into what they told us right now, but you can find several of their testimonials here.)
But before we wrap up today, I want to touch on the algorithm that powers all of this – TradeSmith’s brand-new Probability of Profit (POP) Calculator.
Introducing the POP CalculatorThe POP algorithm is, in a nutshell, a way to determine the probability that an asset will rise (or fall) in value by a certain degree and by a specific date. And we’ve created a tool, the POP Calculator, to help you apply it to any stock.
Anything you plug into the POP Calculator, now in beta for Options360 users, will return the probability of a win or a loss instantly.
This presents near-boundless opportunity. Want to know the likelihood of energy stocks rising 30% by the end of the year? You can do that.
But it doesn’t only work for sectors. Want to know whether Microsoft (MSFT) will be 50% lower by March? It can do that, too.
To test-drive this with you today, I’m going to let the TradeSmith Analytics dashboard prompt us with some ideas.
For example, the VanEck Semiconductor ETF (SMH) is currently listed as one of the most overbought sectors in the market, with a Relative Strength Index (RSI) of 61.46 as of this writing.
Let’s see the likelihood of the index falling 10%, or rising 10%, in the next month…
Instantly we can see that the POP Calculator gives far lower odds of a 10% decline in SMH than a 10% rise. The momentum is behind semis, and they traditionally do well alongside the broad market. With a seasonal tailwind at our backs, that tracks with this probability.
Still, though, 27% odds of a 10% rise are no major vote of confidence by the POP Screener. This trade would likely never make it to subscriber inboxes.
Let’s find something with a higher probability…
Tesla is a widely owned and highly volatile stock. It makes for a great trading candidate. So, let’s see what the POP Calculator has to say about it…
Here, we have higher overall probabilities of a 10% move in either direction in the next month. The POP Calculator sees 54% odds of TSLA rising 10% in the next month, and 37% odds of it falling.
Of course, we can adjust these readings all sorts of ways. We can change the date we want the POP Calculator to check for. We can also modify the price targets to the upside and downside, or what measure of volatility we’d like to use.
You can see how quickly the possibilities grow. That makes the POP Calculator a great tool to check before you place any trade idea.
I hope you’ve enjoyed this quick demo of the Options360 software. It really just scratches the surface, and there’s so much more waiting for you on the TradeSmith Finance dashboard.
We’ll be back to our regular programming next week: a special interview from one of the talented investment experts in our network, focusing on the 254% gain he recently cashed out for his subscribers.
Editor, TradeSmith Daily