Taking the Conservative Profit

11/25/2020 10:00 am EST

Focus: OPTIONS

Danielle Shay

Director of Options, Simpler Trading

Let’s talk about a trade that I found in the options room. In fact, one of the members asked me about this particular ticker, and when I looked at it I knew it was a good setup for a potential short squeeze, says Danielle Shay of Simpler Trading.

That’s why it’s always important to listen to other trader’s suggestions. So, what was the ticker we checked out?

Signet Jewelers (SIG).

This is the company that owns Kay Jewelers. You know that jewelry company you find in a lot of different malls? Well, it would make sense to watch this ticker right now as we’re getting into the holiday season. Jewelry is definitely purchased around Black Friday, Cyber Monday, and into the December holidays. So, we have that overall macro idea, but in addition to that it has 35% high short interest and it’s right near the highs.

I got into this trade a couple weeks ago, and I got into the trade when there was a squeeze, and I was waiting for a volume breakout on the Turbo VZO. I also saw that the trend strength turbo candles shifted to green. This is a great buy signal as far as the candles are concerned because they went from green to yellow to red to bright green. That’s a clear confirmation buy signal.

Signet

The other reason why I liked this trade? An earnings report was coming up (and still is).

Normally on this trade, I'd wait and try to push it a little more. But because the market has been rather soft lately, I'm actually going to take this trade off a little earlier and take a more conservative profit.

I could take it off next week and wait and see what happens right before the earnings report on the 3rd. But most of the time I usually will leave a trade like this on directly before the earnings report, but because I do already have 52% profit, it’s a good target and it’s getting pretty overbought on the Ready. Aim. Fire! I want to take it off.  Plus, in the last few weeks, I’ve wanted to take my trades off before Friday because the Monday markets have been a little crazy.

Now I'll watch it still. Why? Well, we might have earnings setup form on it later. But for right now, this was just a pretty nice and easy short squeeze setup.

To learn more about Danielle Shay, visit SimplerTrading.com.

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