27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
The consumer staples sector, the seventh-largest sector weight in the S&P 500, usually is not known for thrills as highlighted by the three-year standard deviation of just 8.27 percent on the Dow Jones U.S. Consumer Goods Index.
A pair of new leveraged exchange traded funds bring some adventure to a sector with a usually docile reputation.
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What Happened
The Direxion Daily Consumer Staples Bull 3X Shares (NYSE:NEED) and the Direxion Daily Consumer Staples Bear 3X Shares (NYSE:LACK) debuted in late November.
The bullish NEED looks to deliver triple the daily returns of the Consumer Staples Select Sector Index (IXRTR) while the bearish lacks attempts to deliver triple the daily inverse returns of that benchmark.
That index “includes domestic companies from the consumer staples sector which includes the following industries: food and staples retailing; household products; food products; beverages; tobacco; and personal products,” according to Direxion.
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The bullish NEED appears to be falling victim to auspicious timing. While stocks rallied sharply Monday, the consumer staples sector had been betraying its defensive reputation as broad markets slid this month. The Consumer Staples Select Sector Index is down nearly 11 percent this month and is off 10 percent in the fourth quarter.
What is bad for the bullish NEED is good for the bearish LACK. With the consumer staples sector faltering, LACK is setting a torrid pace in its first month on the market. Marquee staples names, such as Dow components Procter & Gamble (NYSE:PG) and Coca-Cola Co. (NYSE:KO) along with PepsiCo. (NASDAQ:PEP) chart the course for the new leveraged staples ETFs.
“Among the standout components that have carried IXR to a decent end-of-year rally, until this week, are beverage giants Coca-Cola and PepsiCo, up nearly 15 and 18 percent over the past six months, respectively,” said Direxion in a recent note. “Proctor Gamble, another exceptional gainer in the index, is higher by 25 percent from six months ago and up more than 10 percent since the start of October on the back of solid earnings that were delivered in the thick of October’s volatility.”
What's Next
NEED could be an interesting way for aggressive traders to play a normally slow-moving sector assuming Monday's rebound has some legs.
“Not every name in the index has been strong of late, of course,” according to Direxion. “But with a general sense of uncertainty gripping markets right now, it appears the volatility will continue through the end of the year. If that were to happen we can expect a flight to defensive names in this sector, bringing with it an opportunity for traders.”
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27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.