Weekly Options Trader for the Week of 1-26-26

There was also a lot of talk on the “weaponization of capital,” where European investors could reduce exposure to U.S. assets (i.e., “sell America”).  The Danish pension fund AkademikerPension said it will sell its US Treasuries by the end of the month, which Treasury Secretary Bessent dismissed as immaterial.

Gold and silver rocked on the news, concern for higher inflation, and geopolitical tensions.  Silver exceeded $100 for the first time in history with a 43% year-to-date gain. Gold, up 15% so far in January, hit another record and is hovering just below $5,000 an ounce.

Trump later walked them back in another TACO move (i.e., “Trump always chickens out”) when he said during his Davos speech that he would not seize Greenland by force and dropped his tariff threats against eight European countries.

Markets rebounded on this announcement as Trump backed off his threats and claimed a “framework of a future deal” over Greenland.

After the week’s whiplash was done, the broader markets were marginally down, leaving the charts in a messy trading range (although the IWM might set up a Buy Setup).

The Russell 2000 and Transportation Index—both long-time laggards—recently pushed to new all-time highs. That improvement in breadth has supported many of our bottoming pattern candidates. Bottoming patterns become particularly relevant when leaders are extended, and capital rotates from strength into weakness.

The U.S. dollar had its steepest weekly decline since May as investors flag concern about the U.S.’s fiscal outlook.  Long-dated Treasurys sold off, pushing up yields and increasing borrowing costs (although they retraced a lot since the Tuesday gap).

In fact, Citadel’s Ken Griffin said at the World Economic Forum in Davos that the heavy selling of Japanese government bonds should serve as an “explicit warning” to US politicians to improve the nation’s finances.  Our nation’s debt is unconscionable, particularly during peace time and solid employment.

Over the weekend, Trump warned of 100% tariffs on Canadian goods if Canada “makes a deal with China.”  Additionally, there was another agent shooting death in Minneapolis, escalating immigration tensions and protests there, setting up another government shutdown as many Dems are refusing to fund DHS.   We will see how the Futures respond when they open on Sunday night.

There will be no shortage of headlines capable of moving markets this week. As always, our focus will remain on price, structure, and risk, not opinions.

There’s also the lingering possibility of a Supreme Court ruling on tariffs, which has been delayed twice already. The administration sounds confident. Markets will decide whether that confidence is justified.

On the positive side, the broader market indexes—the NYSE Composite, Transports, and the Russell 2000—remain in confirmed uptrends. The equally weighted S&P 500 (RSP) is also trending higher, which is encouraging from a participation standpoint.

However, for most indices and sectors, the last two weeks have been persistently choppy and uneven, creating an extremely selective trading environment. This is not a market rewarding broad exposure.

The concerns and headlines already discussed are driving this behavior. These periods always pass, but while uncertainty is elevated, traders are forced to choose between SOH (Sitting on Hands) and the fear of missing an opportunity. That’s simply part of professional risk management.

As I write this, Donald Trump has escalated rhetoric in a brewing trade dispute, warning of potential 100% tariffs on Canadian goods should Canada pursue a trade deal with China.

By the time you read this, that headline—or its market impact—may already be obsolete. That’s the point: news is moving faster than price can be rationalized.

Our internal market gauges remain neutral, but sentiment is drifting toward a bearish extreme. That does not mean it must get there, nor do we try to anticipate it. When sentiment and breadth align at an extreme, we act. Until then, there is no gray area—only patience.

This week also brings a policy decision from the Federal Reserve. Based on data and technicals, the expectation is that rates will remain unchanged. The market’s attention will be squarely on the Chairman’s comments and any nuance around future policy.

Earnings will be another major driver, particularly in technology. Key reports on deck include Microsoft, Apple, Meta, IBM, Lam Research, KLA, and Western Digital.

Outside of tech, Caterpillar also reports—now a meaningful market mover due to its exposure to infrastructure and data-center buildouts.

Nothing changes in how we operate. We will continue to trade the same price patterns, manage risk the same way, and let the market—not opinions—tell us when opportunity is present.

If you're not in the Green Room with us, log in to YouTube, Facebook, or Twitter to get our pre-market review at 9 AM ET.  If you can't make it, you can view the recording.

Good trading!

Be sure to log into your Member's Area to get connected to text messaging through Telegram -- it's critical to receive timely updates to new trades and trade adjustments!  NOTE:  New trade ideas included in these emails are not sent in Telegram when they trigger -- only subsequent needed adjustments.  Alerts for Targets and Stops triggered are also not sent; it is your responsibility to set alerts and manage them following posted instructions if desired.

NOTE:  Please see the document in RESOURCES entitled Master Trader Guidelines for Trading the Open and Gaps.

Because your success is vital to you – and us.   Before selling options or credit spreads, we urge you to review the valuable and detailed information that we have provided for you in your Member’s Area.

Basic Money Management A quick simplified approach to calculating contract size is to simply base your contract size based on the number of shares permitted in your Trading Plan as if you were trading the stock or ETF. Simple Share Sizing = $ Risk / Stop Loss The amount of money that you are willing to risk – divided by – the stop loss amount.

For Example, $100 / .20 = 500 shares. Credit Spread example, if your Trading Plan allowed you to trade 543 shares of AAPL based on the stop loss, then simply round down to the nearest hundred and short an equivalent number of contracts of the option. Since 1 contract represents 100 shares of the underlying, this would be five (5) contracts.

NEW OPTIONS TRADING IDEAS

Here's our Checklist for shorting options/spreads using MTS.  Spreads have unfortunately been wider than normal recently which is why the number of trades recommended in this letter has been fewer than normal.   Additionally, when the VIX is low, the premium received has not been attractive.  Most of you also subscribe to our Advisory Swing and Options Letter and, as you can see, we have many Directional ideas.

1/26:   GOOGL – Over $333.69, consider shorting Jan (1/30) $317.5/312.5 bull put credit spread for a limit of $.60/share (closed at $.77/share).   Pullback after Buy Setup and reversal at the 20-MA.  Stop $319.28 (however, stop out of position if the “debit/cost to close” the spread reaches 2x premium received, which would be $1.20/share in this case, which means that you are not risking more than 1:1).

1/26:   SHAK – Over $92.61, consider shorting Jan (1/30) $89/85 bull put credit spread for a limit of $.50/share (closed at $.60/share).    Buy Setup and reversal at the 20-MA.  Stop $89.48 (however, stop out of position if the “debit/cost to close” the spread reaches 2x premium received, which would be $1.00/share in this case, which means that you are not risking more than 1:1).

1/26:  SMR – Over $21.15, consider shorting Jan (1/30) $18.5/16 bull put credit spread for a limit of $.35/share (closed at $.42/share).    Breakout of a bottoming pattern at the 20/50-MA. Stop $18.48 (however, stop out of position if the “debit/cost to close” the spread reaches 2x premium received, which would be $.70/share in this case, which means that you are not risking more than 1:1).

As you know, by selling spreads on stocks and ETFs where MTS indicates price is unlikely to go, we become the “smart money,” getting paid to take calculated, well-defined risk.

Check out the blog article with more information and monthly results, CLICK HERE

Professional consistency, short-duration trades, and risk-controlled income — that’s what defines the Master Trader approach.