While I was making markets on the Pacific coast I saw two wars unfold, Gulf War I and Gulf War II. The run up to both events was a period of illiquidity and a choppy, grind lower for most of the major indexes. Then we went in and the market rallied like crazy. I remember Gulf War I and after the GI's stormed, the Dow was up 100 points (the index was around 2700 then) and that was shocking. 100 points is just one program click now. The noise made by North Korea is more complex but does follow a similar pattern. In the end, Mr. Kim wants his movies and scotch. What I will look for is a way to play the bounce through the holidays and give things time to work themselves out.

In Aqumin's AlphaVision Landscape, I created a modified end of day plot of one-year EPS growth and one-week total return (inverse scale) for the S&P 500. The tall green spikes in the lower right of the chart below had the highest EPS growth (green), but were down most for the week (lower half of the 3D chart). To play out my saber rattle idea, I want solid companies that have sold off a little bit. One thing I always find interesting is looking at the cross section of these stocks. Growing or shrinking earnings and they all get the smack.

End of Day Plot

Source: Aqumin

View Chart

The second chart is highlight of the names in the corner, some regional banks and big banks, a home builder and an online education company.

First Solar (FSLR) Volatility

Source: Aqumin

View Chart

What interested me when I went to look at the volatilities was

First Solar

(FSLR) - Get Report

. I already wrote a

column

on

Regions Financial

(RF) - Get Report

and it was totally different volatility and sentiment situation. The implied volatilities are nearing lows and the HV30 (30 Day realized volatility of the underlying) is perking up from lows, so there looks to be a slight edge in buying calls. The earnings in FSLR were great but the guidance disappointed and down went the name, $25.00 or so from yearly highs. The post-earnings play has been good to me over the last month and I will take the opportunity now to try it again.

Trades: Buy to open FSLR January 120 calls for $10.50 and sell to open FSLR January 135 calls for $3.70 for a $6.80 debit on a 30 Delta with FSLR trading $124.20.

The trade as a spread. Risk level I. I picked the January expiration to give the stock time given world events, but will always take a quick move up.

*If the volatility discussion in the above piece interested you, and you want to learn more about volatility, TheStreet's OptionProfit's Team is hosting the first in what we hope will be many webinars. The Title of this one will be "Not All Delta's Are Created Equal." Look for the opportunity to register shortly. You may also check out my blog which focuses on volatility and market trends at http://www.aqumin.com.

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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