Hey there, VWAPians!
First of all, why are you not already in this room? I’m on the Money Morning LIVE show before the bell each day (starting at 8:30 a.m. ET), and I trade VWAP LIVE for a full hour starting at 9:30 a.m.
After all, the BEST way to learn the ins and outs of my VWAP day trading is to watch as I stalk and trade stocks in real time.
In fact, I will once again be LIVE TRADING THE CLOSE at 3:30 p.m. ET this Thursday – it’ll be another special session, this time with a very special guest… the one and only Mark Sebastian!
If you don’t know Mark, you can catch him dropping options intel on Money Morning LIVE with me most days, and sign up for his free Profit Takeover newsletter right here. You’re guaranteed to learn a lot, and I can’t wait to geek out with him and all of YOU later this week!
Buuut… if you can’t be in the room while I’m LIVE, I suppose I’ll forgive you – as long as you catch the replays right here, and promise to religiously read your This Is VWAP newsletter, where I do a deeper dive on my Knowledge Bombs.
Today, in fact, I want to review some VWAP lessons we’ve already learned this week, including how option traders who applied my QQQ methodology might’ve snagged a huuuuge win yesterday.
Knowledge Bomb of the Day
If you’ve been watching me for any amount of time, you’ve probably heard that shorting the Invesco QQQ Trust (QQQ) is something I don’t do often or take lightly.
That’s not to say I will NEVER short the Qs – I will, but only if the UVXY is giving me the right signals and the other bearish stars are aligned…
But here’s a Knowledge Bomb for you: If you’re going to short, don’t stay short for long.
So while there are opportunities to make money on a downside QQQ move, more often than not, you have to babysit the trade because it can turn on you on a dime.
Because the market rarely goes down these days, Blanche!
In fact, QQQ breaking back above the 1-minute VWAP is one of my favorite trades.
And now that the Qs have options that expire three times a week – as opposed to after the close on Fridays, like most other contracts – there is more opportunity than ever to leverage these vehicles.
For instance, if you wanted to short the QQQ yesterday, you could have bought Monday expiring put options instead of shorting the shares outright.
But if you wanted to play my favorite pattern – the QQQ breaking back above the 1-minute VWAP, like it did around 11:30 AM ET yesterday – you could have bought Monday expiring call options instead of buying the shares outright.
Take a look at this $366-strike QQQ call option that expired yesterday.
Around 11:30 AM ET, the same time QQQ was breaking back above its VWAP, these call options could have been bought for roughly 60 cents.
Had that fortuitous buyer held until almost the close, those same call options could have been sold to close for about $2.90 – a more than 300% gain in a matter of hours.
Of course, it’s always easy in retrospect to find a perfectly timed trade…
But I’m just using this as an example of another way to play QQQ and my favorite chart pattern.
When I do play options – on the QQQ or otherwise – I usually follow a couple rules:
- I’m looking for the closest expiration.
Because I’m a day trader, not an investor, I’m not trying to pay for time value I don’t need.
So the QQQ having options that expire three times per week (Monday, Wednesday and Friday) gives me three times the opportunity.
- I buy at- or slightly in-the-money options.
At the time of the VWAP break yesterday, at-the-money options would have been the $366 strike.
Even though out-of-the-money options run cheaper than at- or in-the-money-options, they require a bigger move on the charts in order to profit…
And when you’re a day trader like me, you don’t always have time for a big move to play out.
But if you like options trading around the VWAP, be sure to pencil in Thursday’s special Trade the Close session with me and Mark Sebastian, who practically invented VIX options.
For more on that, keep an eye on your inbox… and for now, come watch me trade LIVE in the Money Morning LIVE room right now and at 9:30 AM ET each day.
See you in there!
Kenny “The Warlock” Glick
One response to “Another Way to Play My Favorite Pattern”
August 17 2021