The year 2019 is dwindling down, let’s review the stocks that made headlines this year, what we learned from all of this leading us to our own study to crown the Best Stock this year.
We are going to you through a chronological retrospective of the year.
The aim is to highlight key take away for each month before doing a synthesis at the end.
Best Stocks This Year: January
October through December 2018 was extremely rough for the market when it went from then all time high 292 for SPY to 235 in the last week of December.
That 20% plunge had all the pundits calling for a full-blown market recession going into 2019.
To make matter worse, we started the year with a significant gap down due primarily to weak economic data in china.
SPY lost 4 points at open on the first day of 2019. It opened at 245.98 from a close of 249.92.
In hindsight, what was then to follow on Jan 2, 2019 set the tone for rest of the year !
Yes, little did we know that the default mode for the rest of the year would be: when in doubt, just buy the dip.
Point in case, the very next day on Jan 3, 2019, following another gap down due this time to Apple (-9% on that day) lower guidance, the leading market index spiked up on Jan 4, 2019 from 244.21 close the previous day to a high of 253.
The rest of the month was a furious rally for SPY.
It peaked at 270 on the last day of January despite a small pause mid-January at the start of the Earnings season.
This January recovery from December 2018 lows marked the best month for SPY since 1987.
These are the type opportunities on which options traders make a living on with correct entries and exits.
Markets trends are traders best friends until the stop.
This led us to generate a quick study that we can share here with you as another start of the year is looming.
Us markets tend to be very volatile int the first week of the year.
For 2019, here is the biggest advancing days confirming this with 3 of the Top 10 in January alone.
You may point out that August has 4 days in the Top 10 to only three for January.
However, you will discover later in the discussion that these days for SPY in August mostly came on the back on big draw downs.
Opportunities are usually abundant to make money in both directions : bullish and bearish.
Big swings (more than 1% move on SPY) are frequent so disciplined traders can take advantage of that with straddles.
Such was the case for those who woke up on Monday, January 28 and witnessed Nvidia (Ticker:NVDA) plunges down -18% in pre-market due to poor guidance.
By now, you must have picked on the importance of guidance that company publish mostly after Earnings.
However, in the case of Apple and NVDA, their guidances were before Earnings and served as a warning to Analysts that the Earnings numbers will not be all that good.
Traders with NVDA puts at close on Friday and who carried them for Swing trades were handsomely compensated up to 18000% profit on the weekly options.
Yes, you read that number correctly.
This means that if you had $100 worth of puts on NVDA on that morning, you could have walked away with 180 times your initial bet or a cool $18000.
If that does not convey the Power of options to you, then I am not sure what else will.
The flip side of it is that the traders who were carrying calls positions lost all of their money.
Worth a mention is the news of Bristol Myers (Ticker: BMY) was buying Celgene (Ticker:CELG) on that busy January 3 day.
Celgene Jumped 23% while BMY tanked -14% on that day.
Others bio pharmaceutical companies (Gilead, Teva for instance) gained that buoyed by the Merger and Acquisition news.
With such a start of the year for this industry, could it be that our stock of the year will come from the healthcare industry ?
Keep reading, we shall find out soon enough.
Best Stocks This Year: February
SPY gained “only” 10 points in the meat part of first quarter Earnings Season (from mid-January through mid-February).
The biggest moving stocks to the upside in my Watchlist were Roku, JD, Micron (Ticker:MU) and Western Digital (Ticker:WDC).
On the downside, useful trades in February were found in Teva and Mosaic (Ticker: MOS).
I should point out that the calls side outweighed the downside by a ratio of 2:1.
In other words, there were more opportunities to the upside than the downside.
Best Stocks This Year: March
Someone on the platform quora earlier this year about my biggest ever gain trading options.
The answer was simple because I remembered as if it was yesterday.
Boeing (Ticker:BA) plane crash on March 10, 2019 in East Africa prompted the stock to plunge 12% on the next trading day.
I just was fortunate to be holding puts that I entered at close on Friday, March 8 2019.
My rationale to be in that trade was following a downtrend that started on March 1 after BA reached All Time high (ATH) on that day at 446 but closed red.
I felt so conflicted on that Monday morning.
Here I was benefiting for this big tragedy so I almost failed to sell the position as BA was furiously rallying back to 400.
One of the highlights for me in April has to be AMD calls trade.
On March 28, Apr 5 30 calls were worth 3 cents per contract.
A mere 4 days later on April 3, they were trading between 64 cents and 65 cents.
This represents a gain of over 2000% profit. Not bad at all for a week work.
The Dark Pool signaled the entry to this trade on March 28.
I cannot omit the huge gains on Disney(Ticker:DIS) on April 12.
This took place two days after its Investor Day. The stock jumped from $116 to almost $130 in a single day.
The overnight payout on the weekly 128 calls was 54400%.
Yes, that figure is absolutely correct. The reason for the huge payout is due to the stock Low volatility in the absence of news.
So when news introduces unexpected volatility, options tend to spike up big time.
Another big payout in April was on Qualcomm (Ticker:QCOM) calls after they announced the settlement of their lawsuit with Apple on April 16.
The stock itself jumped over 23% in a single day from $58 to over $70.
That momentum carried the stock to almost its 52-week high at 90 in just over 5 day.
The big takeaway here is momentum trending is very powerful.
When a stock get a steam and big or smart money wants to own it, that makes it very profitable for retail options traders like yours truly.
The old saying “Sell in May and Go away” in reference to the vacation period for the big money movers is actually not verified.
Studies have shown that there is equal probability for investors to make money between May and September as it is in the rest of the year.
However, in 2019, SPY suffered three of its Top 10 declines in May. May 7, 13 and 31.
In case you are wondering, May the 13 was not a Friday 🙂
It was a Monday.
We have been scrutinizing the major options trades we took in 2019 through the lenses of the biggest market index SPY.
June was a copycat of the month of January.
After a deplorable month of May and a head fake on the first day of the month, SPY rallied 20 points in 3 weeks
fueled by the Job report on Friday June 7th.
The Job report will become a recurrent theme or catalyst (if you believe pundits) to the market bulls for the rest of the year.
That first week of June saw higher highs and lower lows pattern mostly on Federal Reserve Board Members speeches on being ready to Lower interest rates.
The “bad Job report” just happened to cap the major rally across all indexes.
It put that between quotes because the Jury is still out on how an actual of +75k is interpreted as bullish when the expected number was +175k.
Major stock movers on our Watchlist were Workday (Ticker: WDAY) and Adobe (Ticker:ADBE).
You can remember these as the Cloud Darlings of Wall Street.
They are always among the best stocks for options trading no matter the overall sentiment of the market.
On June 25, Allergan (Ticker: AGN) jumped 30% to $168 on Abbvie Inc (Ticker:ABBV) buyout.
July 1 followed a pattern we picked on in March and that has repeated every month on SPY and the rest of the market.
That is a big move in the first couple of days. Either a huge gap up and a follow through or retreat.
It was with the latter that the started the month.
The rest of it was driven by the monthly Job report, the Federal Reserve Chairman Congressional Testimony on July 10, political headlines on drugs manufacturers and of course the third quarter Earnings season (July 15th through August 15th).
Netflix was the best opportunity post Earnings for options traders.
For two weeks, it generated setups in both directions that made it worthwhile.
We can also mention the acquisition of Symantec by Broadcomm (Ticker:AVGO) on July 3.
That news prompted a spike of 14% on Symantec that galvanized other stocks in the cloud sector in the likes of WDAY and ADBE.
Friday August 23 was the very embodiment of an erratic market were SPY posted its fifth biggest loss of the year closing at -2.57%.
The strange thing was that despite a gap down, it was rallying towards a flat day when news came in and it reversed badly into red territory.
Overall all, we can classify the month as the worst one for SPY.
Why ? Here is the visual proof depicted below with the worst days for this year.
Of the Top 10 days with the biggest decline, August had 3 of them.
The other two apart from the 23rd were August 5 (-3.01%) and August 14 (-2.96%).
only May had an equivalent number of declining days but the amplitudes of the declines in May were much smaller.
After the alternating ups and downs sideways of August, how do you think September started for SPY ?
Hint: Read above.
Well, the first three days as expected provide a huge jump after the somehow mandatory head fake on the first day just like in June.
SPY gained almost 10 points in 48 hours between September 3 and September 5.
In the second week, something quite peculiar occurred as if investors were looking for bargains.
I am talking about the fact that stocks that have had a very poor year-to-date performance were green on September 9 and September 10 while the rest of the market was in the red.
The likes of NTNX, BIDU or Macy’s (Ticker:M) were all gaining over 5% while good performing stock so far in the year were selling off.
Another selloff in the firs two days of the month confirmed our prior observations.
This will mark the last major dip in the market for the rest of the year.
Take a look at this run.
October 3 Low of the day is about $285. Halfway through the month, SPY was flirting with $300 level.
November Rain ?
There was no raining on SPY party in November.
Au contraire, the first two days were bullish with the standard gap up this time.
Just five points in two days ????.
From this point forward, all headlines were from US China pending Phase 1 deal and the Tariffs cancellations.
The last month of the year was dominated by the US China trade deal and the ups and down of tariffs tweets.
Following the first two day of the month panic sell off (if you guessed due to US China Tariffs headlines, you are correct) the market quickly recovered.
It just kept melting up posting All Time High one after another pretty much from November 4 through the last week of December.
It was a strange environment as you would hear trader complain about the market being “too bullish”.
So, here you have it on how the year went in US markets.
Yahoo Finance voted Target (Ticker:TGT) as the stock of the year. It gained about 100% this year while others like ROKU and AMD gained 355% and 160% respectively.
You be the judge. Better yet, you can use the Screener tool of Finviz.com to quickly sort out the by performance.
What will discover ?
With 355% gains, Roku does not even make the Top 20 !!
May I point out that the two big moves TGT made were on Earnings Release ?
My selection of the stock of the year is abased upon its ability to provide predictable options trades.
That will clearly eliminate both Roku and TGT as they jumped a lot on Earnings and we have preached enough here on not gambling on these.
Rather, we will suggest a stock like Western Digital that provided opportunities on both sides to make money trading options.
On Lotto days, that is Friday if you are new to this blog, WDC provided 28 winning trades on the long side and 20 winning days on the short side.
I counted 51 such days this year which means that 48 out of 51 times, strangles would have made money on at least one leg. That is almost 95% of the time. I kike these type of odds much better than gambling on Target or Roku Earnings 4 times a year.
Don’t you ?
We went through the entire year reviewing the biggest items throughout.
The summary led us through t a short list of with our best stocks this year to trade options on.
We take some major Lessons learned that we intend to apply in the upcoming year.
Are you determined to succeed in 2020 and emulate some of these trades we took in 2019 ?
Find out how to achieve your goal with our 2020 Option Trading Tips.