Our short dated trade from yesterday reached an 85% gain.
It lasted less than 12 hours. There weren’t overnight jitters, no multi-day stress, we were in and out. Surgical.
That’s the nature of my intraday trading strategy.
The strongest setups of the day follow a specific framework.
And thus, new traders struggle because:
- They don’t know the framework.
- They don’t follow the framework.
I built a complete trade thesis and trade plan during my livestream yesterday, August 6 that followed the framework.
Look for this pattern in the market today.
The Setup
Kratos Defense & Security Solutions Inc. (NASDAQ: KTOS) hit my scanner earlier this week as it surged into the earnings announcement on Tuesday, August 4 during after hours.
It’s an aerospace and defense stock during a tenuous war with Iran.
Once the earnings dropped, the price spiked higher into Wednesday morning:
- Q2 adjusted EPS $0.21 per share, vs. FactSet Est of $0.14.
- Q2 revenue $458.8 million, vs. FactSet Est of $410.4 million.
On Wednesday intraday, the price slid lower. But it consolidated into the close and it didn’t fall below the pre-earnings level.
That brings us to Thursday morning…
The Execution
The stock had everything going for it.
- Bullish news.
- A strong uptrend followed by consolidation.
- In a volatile sector.
All that was left was the trade plan…
Here’s what I saw during premarket on Thursday, August 6:
The stock was still above the pre-earnings level, and there was clear resistance from the consolidation on Wednesday at $56.30.
I told traders: If the stock can get above that level, I’m interested in the $57 calls with an expiration of August 7. Just one day away.
The short expiration helps the position make larger gains compared to the underlying stock.
Here’s what happened next:
It might not look like much on the chart, but the contracts I alerted at the beginning of the day gained 85%.
That’s the magic of short dated options.
You don’t have to time it perfectly either… I usually sell some of my position early to lock in gains. And even then, I rarely sell the rest of my position at the top candle.
An 85% gain outpaces the S&P 500 ETF Trust’s (NYSE: SPY) YTD gain by a multiple of 6.
6 times the market’s YTD gain in a single morning.
Look for stocks that are in a strong uptrend with bullish news (it helps if they’re in a volatile sector).
Then identify key support and resistance on the chart. A stock that can hold support and push above resistance can push higher.
Be good (and be good to others),
Ben Sturgill
*Past performance does not indicate future results. Not typical.
