The easy trade over the past 20 Monday's before the close has been to buy the Dow Jones Spiders (DIA, $154.89, up $2.12) to play the up Tuesday's. We mentioned a few weeks ago that options traders have done extremely well buying call options on the Dow before Monday's close and selling them on Tuesday's for some sweet gains.
Of course, with the market closed yesterday, traders would have needed to place their bets before Friday's close and ahead of a 3-day weekend. The Dow Spiders trade a bevy of options, including WEEKLY options so traders could have play the May or June contracts to take advantage of today's pop.
The May 153 calls (DIA130531C00153000, $2.01, up $1.32) closed at 69 cents on Friday and are up nearly 200% after trading to a high of $2.14. These options expire this Friday so it would be wise to take profits immediately if you happen to be in this trade.
The June 155 calls (DIA130622C00155000, $1.56, up $0.78) are also up triple-digits after closing at 78 cents on Friday. The calls have traded up to $1.64 and the 100% gains should be locked-in.
If the current pop fades, traders can look to play the June 152 puts (DIA130622P00152000, $0.87, down $0.78) as they are down and could rebound following today's 50% pullback. We doubt the trade will make 100% in a day but it could make a nice double-digit return if the Dow can't hold its gains.
It has been a tough bet to short this market and why we are still comfortable playing call options although we did place a few bearish bets last week. We would like to start unwinding the rest of our current trades as the June options are expiring in less than a month. We are starting to look at July and August trades but it is too early to say if we will still be in call options or if we will be playing more put options.
We said over the weekend we went roller-coasting and the ride hasn't stopped as we are loving today's action.
The Dow is up 185 points to 15,488 while the S&P 500 is higher by 19 points to 1,668. The Nasdaq is advancing 46 points to 3,504.
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