Disclaimer: I am not liable for losses or responsible for your gains. These decisions should be made based on risk tolerance, personal financial situations and appropriate DD.
Recently, I’ve seen incredible opportunity in the financial markets and I am compelled to share it with BluSuit Members. The reason why I have been buying leaps lately, specifically in a few names, is due to many incredible growth stocks trading at insanely low valuations. The iron is hot and I’ve needed to strike, despite volatility.
Options, specifically, present a good opportunity to enter a position at a later date or can present a good trade idea. Personally, with my portfolio strategy, I have ran out of cash buying the dip but I know there is an enormous opportunity. I have chosen to buy long dated call options as a way to pencil in a specific price I like for a stock BUT, more importantly, define and manage risk in the short term.
I am not sure if we are bottoming but I am sure that we will bottom and I don’t believe the Federal Reserve is willing to crash the financial markets. In addition, based on the below SubStack I wrote:
Data keeps coming to surface to validate this thinking. In other words, the philosophy of dwindling government stimulus to the every day consumer is naturally creating pressure on consumer demand. This means inflation is going to slow down in 2022 and the Fed likely won’t have to be as aggressive as previously thought.
Contents:
Current State of the Market
Thesis for LEAP Options
10 Small and Mid Cap Picks with Strike Price I like it at
Prices are Extremely Low in Small & Mid Cap
The NASDAQ from all time high to the previous market low was 20%, meaning we “technically” crashed. However, the story was much different in the S&P with only 11% down. The key take-away here was that the market just went through one hell of a rotation out of growth stocks because of interest rate fears. Essentially, fears of 1970’s style hyper inflation and Fed response scared asset managers to flood out of tech stocks in droves. An additional result that manifested from this price action was retail capitulation and selling.
This essentially drove prices of small and mid caps down to bear market valuations that rival 2018, 2020 COVID crash, and 2011 Bear Market. All of these markets presented life changing opportunities to buy stocks. The most opportunity here is likely in small caps (which is why I am publishing this SubStack).
When looking at the broader NASDAQ, and what’s trading above the 200 day moving average, even after the rally we had today, we are still in Bear Market territory with only 19% of stocks trading over 200 day ma. This chart can really be a great representation of overall market breadth and participation. Simply by looking at some of the largest sell offs recently, it has almost always proven to be constructive to buy when less than 15% of stocks are trading under the 200 day moving aver.
The point is that now is an excellent time to buy and in a year from now, we’re likely to think, “wow, I can’t believe that stock was trading that low".
Especially in small caps, there are incredible opportunities. Now, let’s get into the good stuff. The stock picks that can be excellent LEAP option plays for this market correction/crash.
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