Unloved Technology 3x

It is very hard making a recommendation before the election. You never know what the voters are going to decide even though the polling is leaning a bit right this year. Still it is iffy. What has been undeniable from where I sit in my 3D world has been the power of earnings and specifically in the tech area. By chance and searching I found a way to put this all together.

Most of what I have been looking at on an individual basis has been unloved technology. I think that has been where the bargains are. When I was searching for picks in Aqumin's AlphaVision Landscape of overbought/oversold the Direxion Daily Technology Bull(TYH) leapt out of the screen at me. On the face of it, the TYH looks overbought at up for eight straight days with a 14 day RSI of 73.4. Very red buildings in the left corners indicate overbought for a particular industry group, which in this case is equity ETFs.

I think there is a reason. TYH looks to mimic the Russell 1000 Technology Index on market steroids (at 3x the performance) and there has been plenty of it lately. There is a good mix of names in here, some market darlings, but mostly not. What was most interesting is the implied volatility (IV) keeping at relatively lofty levels versus the 30-day historical volatility (HV30). The puts I am recommending are around a 70 IV versus the underlying HV30 of about 41v. I have been looking for another ETF to roll like the Direxion Daily Emr Mkts Bull 3x Shs ETF(EDC) for OptionsProfits subscribers and I think I have found it. As long as the volatility spread stays healthy, I can be interested.

Direxion Daily Technology Bull (TYH) Volatility

Source: Aqumin

View Chart

Even with many mech names making year highs TYH still has $4.00 to go as of Friday's close. Given the election, I am going to move down the strikes a bit and set up for a buy write entry point $3.00 under the current market price of the TYH. For OP subscribers, expect to be put 100 shares of TYH somewhere below $37.00 if you are interested in this technology play. Or, the puts go out worthless on expiration and we do it again in December, conditions permitting.

Trade: Sell to open TYH November 37 puts at $1.00 with TYH trading at $40.25 or better. Risk Level II.

At the time of publication, Andrew Giovinazzi held no positions in the stocks or issues mentioned.

Andrew is the Executive Vice President of Business Development for Aqumin, where he participated in the design team to apply AlphaVision to the financial markets. For 15 years he was a member of the Pacific Exchange and the Chicago Board Options Exchange, where he actively made markets and traded in both equity and index options.

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