Here’s how I spot hot stocks BEFORE Wall Street pours money into them.
Hey all, JD here, just before the market closes, with your Rational Trader Market Analysis daily.
I’ve got a couple more mean reversion cash machine trades for you today.
Yesterday, we hit what I like to call the “sweet spot,” and I want to keep that momentum going.
Today’s trades still fit that sweet spot — one is a reverse iron condor, the other a call credit spread.
First Setup: Reverse Iron Condor on AMAT
Let’s start with the reverse iron condor. This is a strategy designed to make money when a stock moves big in either direction — up or down. We’re not betting on which way it goes, just that it will move.
Here’s how it’s built: you buy a call and a put at the same strike price — in this case, $190 — and then you sell another call at a higher strike ($197.50) and another put at a lower strike ($182.50). The short options help offset the cost of the trade, but they also cap your maximum gain.
The total cost here is about $6 per contract. If the stock makes a move of roughly 3.8% to 4% in either direction, we can reach full profit — which is $7.50 per contract. That’s a nice payoff considering the small move required. This is why I like the setup on Applied Materials (AMAT) today.
Second Setup: Call Credit Spread on SNDK
The second trade is a call credit spread on SanDisk (SNDK). They report earnings after the close, and right now, they’re trading above two standard deviations from their mean.
For anyone new to that term, “two standard deviations” is a statistical measure — it basically says the stock’s price is stretched much farther than normal from its average. That often signals an overbought condition, where further gains become harder to sustain without a pullback.
The setup here is simple: sell the $45 call and buy the $50 call for this Friday’s expiration. This trade brings in a credit up front, and as long as SNDK stays below $45 after earnings, it’s profitable. If the stock spikes higher, the long call we bought at $50 acts as insurance to limit risk.
Market Context and Closing Thoughts
The broader market is mostly flat today — nothing too exciting — except for a little life in the Russell 2000. That’s exactly the kind of day where these setups can stand out.
So that’s the plan: a reverse iron condor on AMAT to profit from movement in either direction, and a call credit spread on SNDK to take advantage of its stretched condition heading into earnings. Both give us clearly defined risk, and both are positioned to benefit from volatility.
That’s all I’ve got for today. This is JD — take care, have a great evening, and I’ll see you next time.
Talk soon,
JD
The Rational Trader
