Last week we put together a strong win with a 2-3 day trade in the triple bear financial ETF, the FAZ. This has been a great month trading options on this volatile stock.
This thing really ramps up and when it gets going – the power in the move is breathtaking. The best gains in options happen in very short time frames. The two components of an option price of course are time decay and intrinsic.
If you can override the time element then you have an instrument than can move with the stock – kind like moving at the speed of light. It’s a beautiful thing when you’re on that horse and are able to ride it out.
Today I mentioned my affection for FAZ again. Early in the day, it was flat to lower – as you can see from the 15 min chart below. But it ramped up in the last hour, closing up near 10% from the lows and now with three days left on the weeklies we could see this back to the 70′s of last week.
What all the sudden turned this on today? An overbought market, profit-taking and some cold water thrown on some brokers by Meredith Whitney. Whatever the reason, it moved. I suspect if the markets pull back into the end of the quarter then we’ll see this run some more.