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Nicolas Chahine

I am from Main Street not from Wall street yet I have a 90% success rate on credit spreads. Prior to trading full time, I climbed the ranks of the corporate finance world. Then in 2000, I branched...

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Options Outlook For The Week Of April 28: Avoid Trying Anything New!

This is not a time to do anything new.

Headlines are killers of the best trades. Just imagine we see actual physical threats from world leaders.

Conversely, snap-back and relief pops can also be also killers of short plays.

Conclusion: you lose nothing by waiting at least until Monday.

Caution is still warranted especially that traders were likely to sell going into the weekend with headlines looming. Traders need any sign of de-escalation.

Friday's sell off was all about geo-politics.

All day long, CNBC was trying to assign blame on Amazon (NASDAQ: AMZN) and other over-inflated valuation. They were wrong.

Traders knew they would sell off Friday to guard against bad weekend development. Apple (NASDAQ: AAPL) would not have gone strong all day. Most evident is that in the last couple of hours, the markets were trading in stride and in the same direction as the TLT, YEN and the 10-year.

Had there not been Ukraine headlines, Baidu (NASDAQ: BIDU) would have soared well past the two percent that it did. Also the VIX would have stayed well above the five percent (was nine percent at some point). Nothing but fears of headlines mattered Friday.

So, what about Monday?

1. IF there's no negative headlines, then traders are likely to have a relief pop (possibly short-able since relief and not a change in fundamentals).

2. If traders do get a negative development, then the selling should continue. Buying puts in MOMOs might work.

3. If ('hopium' coming) we get a positive development (like an emergency meeting by the powers at be) then we will definitely come into green on Monday.

More specific recap & revisiting a few of our weekly points of action:

Geo-political headlines: On Thursday, traders expected a sell-off Friday going into the weekend and the markets delivered. No surprises.

The VIX: gained five percent but again faded into the close (still closed five percent. VIX calls still outnumber puts by a large margin = traders are more cautious).

SPX: Traders did not chase the SPX and were right in doing so. Then again, before Friday's open, traders barely missed the 1862.5 pin by pennies. Also, ahead of the open traders said that 186 will be good support and that's about where they took it into the close.

Options make up: First time in a while I see more puts than calls in some names that were checked = signs of waning optimism.

MOMOs: super green Tuesday, then turned into bloodbath Wednesday, followed by a 'meh' Thursday. That culminated on Friday thanks to the spark lit by the likes of Amazon. A lot of damage here.

The Apple Rabbit: Held like a champ Friday. Had it lost its gains then the day would have been a lot rougher. Baidu also helped especially that it went red for a while.

Google: Though it too was down two percent, markets are NOT treating it like a complete MOMO. Again the GOOG performed in stride with GOOGL.

IBM: On Friday, the candle was worse.

The 10-year: lost 0.8 percent, but was much worse two hours into the session.

TLT: Here too, the actual percentage up doesn't tell the story. Caution. Just look at the 180-day range. This has been a stock market crippler.

The YEN: Though it closed green, intra day and after theopen pop it drifted lower all day. Traders are still in the middle of the danger zone for the past 180-days.

Check out the video below for a recap of this week's outlook:

Posted in: Previews Options Pre-Market Outlook Markets Trading Ideas