Had a nice trade with puts on AMD today. I use a relative weakness put option set up that works well especially on gap up days. I look around at which names just seem heavy and can’t get any traction even while similar names are doing well. NVDA, SMCI, SOXL and more chip names were doing well, but AMD was weak. It fell under VWAP soon after the gap up and the market was stalled so it seemed like a good reward to risk all things considered. If SPX were to fall then the trade would have worked even better, but I still got a great trade from it with 180 strike puts for this week. Locked half on a double and had a tight stop on the rest that triggered. With relative weakness names I want it to be an easy trade because it’s so weak, so if it’s bouncing back and being difficult then it’s not proving to be a perpetually relative weak name. That’s the logic.   

I tried the same exact trade with TSLA too with 175 strike puts in the morning and had a nice gain on it but it ended up popping back up just a little too much for my liking so I ended up with a small paper cut loss on it which is fine. It ended the day lower but I had a plan and stuck to it. These relative weakness put plays are good for risk control usually. You find a stock with sellers in it, while SPX is stalled out on the upside, and wait for an area to enter the relatively weak stock on a pop. Usually this is when the stock is under VWAP, and then as long as its acting heavy and having trouble reclaiming a certain level you can use that area as a risk spot and can either set a stop loss on the option once you enter or can watch it closely. With options, always size like it might all go wrong. That way if it does go wrong, you don’t get burned. However, that doesn’t mean you can’t try your best to have tight stops or control risk as well as possible. This is a different strategy than 0DTE options because with weekly options on a heavy name you have the ability to try to get an entry that works right away or you stop out and try again later or move on. 

AAPL same set up. I didn’t take this one because I already had 2 trades going with puts but I was looking at the 175 strike puts at the same time as the other names. This would have worked the best out of all of them but that’s okay. Can’t always pick the perfect trades in real time. Great chart example of a relatively weak stock for the put strategy. See how smooth the ride down is? AAPL had bad news about antitrust stuff and every pop got sold. Beautiful if you get puts early and then just make free or set a trailing stop and let it work. 

You can also flip this strategy around and also use the relative strength call option strategy I use. On gap down days in SPX, look for the best and strongest names and once the market looks like it’s stalled out to the downside, and the individual stock you are watching holds a base level and keeps moving up above VWAP you can use that base area as your risk point. Simple strategies that I want to try to share since it’s hard to find workable strategies out there that can be explained to people. Smaller size, the ability to estimate reward if right and risk if wrong, and estimate the probability of it playing out and that’s all there is to it for this set up.