Trade Alert: Euphoria

Bullish options trades on four Trump trade top names.

I don’t watch the show, so I guess its title is ironic.

A Different Kind Of Market

Since last week’s election, we’ve been in a euphoric market for crypto and other “Trump trades”, i.e., names that are expected to benefit from President-Elect Trump returning to the White House. This market calls for a different kind of trading. Valuation and other fundamental metrics aren’t going to help us here.

But Portfolio Armor’s Top Ten Names might. That—along with what my understanding of what a “Trump trade” is, is what I’m betting on here. In last night’s post, I mentioned that at least three names in Monday’s top ten were Trump trades.

Going over the list later, I found a fourth, a name I hadn’t been familiar with. I am placing bullish bets on all four today.

Details on those below, but first, let me address a question that may be on your mind.

What If This Is A Bubble?

It most certainly is a bubble, but bubbles are when you can make the most money in short periods of time. The key is to get out before it bursts. If I had to guess how long this bubble would last, I’d say until about the end of the year.

Between now and then, traders are free to imagine all sorts of positive impacts from a Trump 2.0 administration—maybe they’ll start a Strategic Bitcoin Reserve? And so on. Once Trump enters the White House in late January, those hopes will meet some resistance and Trump trades may need to be repriced.

So, we are going to try to take profits before the end of the year.

Maybe This Isn’t For You

Maybe you would rather stay safe. That’s fine; you can download our iPhone hedging app by clicking on the QR code below or aiming your iPhone camera at it.

But If You Want To Swing For The Fences…

Here are my four bullish Trump Trades for today.

Trump Trade #1

The stock is Robinhood Markets (HOOD 0.00%↑), and the trade is buying the $37 $35 strike calls expiring on December 27th, for $2. The max gain on 2 contracts is uncapped, the max loss is $400, and the break even is with HOOD at $37. This trade filled at $1.70.

Trump Trade #2

The stock is Tesla (TSLA 0.00%↑), and the trade is a vertical spread expiring on December 27th, buying the $390 strike calls and selling the $395 strike calls, for a net debit of $1. The max gain on 4 contracts is $1,600, the max loss is $400, and the break even is with TSLA at $391. This trade filled at $1.

Trump Trade #3

The stock is Coinbase (COIN 0.00%↑), and the trade is a vertical spread expiring on December 27th, buying the $345 strike calls and selling the $350 strike calls, for a net debit of $1.35. The max gain on 3 contracts is $1,095, the max loss is $405, and the break even is with COIN at $346.35. This trade filled at $1.35.

Trump Trade #4

This is the one I wasn’t familiar with. The stock is GEO Group (GEO 0.00%↑), and the trade is buying the $28 strike calls expiring on December 27th, for $2.10. The max gain on 2 contracts is uncapped, the max loss is $420, and the break even is with GEO at $30.10. This trade filled at $1.75.

Exiting These Trades

For the call spreads, I’m going to set GTC orders to exit at about 95% of the spread (so, $9.50 in the case of a $10 spread) and lower that price, if necessary, as we approach expiration. For the calls, I’m going to set GTC orders to exit half at about 3x what we paid for them, and of course sell whatever is left before expiration at the best price I can get.