December 16th, 2022

The Boiler Room Is Back With A Facelift

The Boiler Room is back. The shady side of this biz involves individuals or firms who use their vast email list and social influence to pump-and-dump stock picks. The U.S. Department of Justice filed eight new lawsuits against social media influencers for stock manipulation schemes worth over $100 million.

I remember watching some YouTube videos during the height of the pandemic of people who were coaching others on how to trade but were far more focused on the showmanship of the video than the quality of the trading advice.

It’s not just the influencers though. There are some out there now hocking their “new indicator” which is really a free indicator on nearly every platform, but they renamed it and tweaked the default settings.

Imagine paying $700 for the new XZY indicator and then opening up the code to see that it’s just the RSI with a 10-period instead of a 14-period setting. Sadly, I’ve seen this pop up more now that trading is becoming more difficult. It’s not to say they are all bad, but you do need to be careful and ask extra questions.

Of course, if you’re reading this that means you know the importance of learning the craft and you already know that Traders Reserve is here for you.

I’ll say it again – John Hutchinson called it in October when he told people to watch out if the Fed terminal rate went above 5% and we sure felt the pain yesterday as more investors processed the information.

Just be careful out there. This week’s crackdown shows that there are some bad eggs out there.

Alright – should we be looking for trades right now? Keep reading…

Today is quadruple witching day, which occurs four times a year when the simultaneous expiration of stock index futures, stock index options, stock options, and single stock futures contracts occurs. There’s no historical performance advantage, but volatility and intraday volume can spike. The hour with the most volatility and volume tends to be the last hour of the day.

After yesterday’s mess in the market, you may want to stalk this stock. Seagen (SGEN) came across a scan that I ran. I’m using after-market prices, so it may change but here’s a spread that stands out to me.

Here’s the stock chart and you can see that over the last year the stock remained above $115 the majority of the time.

Boiler Room Is Back

The 17 FEB 23 $115/110 put spread is showing a credit of $2.05. That means your max loss on the trade is $295 per spread if SGEN closes below $115 at expiration. The $215 strike has roughly a 26% probability of doing so. The max gain is $205 and has a probability of 74%.

The market fell by over 700 points, providing a good time to sell put spreads on stocks that you believe are heading up over time. This trade will profit if the stock goes up in price or moves sideways. That means you have the potential to profit in two of the three possible directions the stock can move.

This week was filled with all of the volatility I expected and tried to warn you about last Monday. Let’s hope we can have a more defined short-term trend next week and can find some good stories and trades.

Have a great weekend!

If you have any questions, comments, or anything we can help with, reach us at any time.
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Jeff Wood

Editor, Filthy Rich Dirt Poor

Trader, Options Testing Lab

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