Cheap Mag Seven calls offer asymmetric upside
The guest argued that buying out-of-the-money Magnificent Seven call options 2 to 3 months out represents a highly attractive, contrarian trade due to depressed call pricing and upcoming earnings support.
The argument
With market participants heavily hedged and bidding up put options (high put skew), call options have become exceptionally cheap. Furthermore, because these companies have earnings dates within the next month, the implied volatility of a 2-to-3-month option will be structurally supported, preventing rapid premium decay.
The thesis, stress-tested
✓ What validates it
- ✓Taiwan Semiconductor or ASML report strong earnings, validating the AI/semi narrative and sparking a tech sector rally.
- ✓Put skew ranks begin to normalize as investors chase the upside.
▸ Risks discussed
- ▸A systemic market sell-off or disappointing earnings results from key tech players could render the calls worthless.
Hear it yourself
"And so the fact that we sort of gassed back up and through that strike, when we're at 6,300, you know, here, right, and you are positioning for the possibility of a huge move like that based on that position, you know, you very easily could have made some money, and those options were very cheap to trade, right, going into the end of the…"
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