Weekly Options Trader for the Week of 2-2-26

After all of that news and volatility, the SPY, DIA, QQQ finished little changed although the IWM was weaker, closing down 1.5%.

Over the last two weeks, most indices and sectors have displayed persistently choppy, uneven price action. This is not a market rewarding broad exposure or passive participation. Instead, it is demanding selectivity, timing, and risk control.

Leadership has narrowed, rotations have been abrupt, and reactions to news have been exaggerated in both directions.

That environment persisted last week.

Wednesday was one of the calmer reactions to the FOMC meeting in many years.   The Fed kept rates unchanged as expected.   Powell said the data no longer justified additional near-term rate cuts. Officials pointed to accelerating growth, moderating inflation pressures, and a more solid labor market, and removed prior language about downside employment risks.

The next rate cut is not expected until the June meeting, which would be under the next Fed chair (Powell’s term ends in May), with a total of two cuts for the year.

Gold and silver gapped to all-time highs on Thursday before tanking.  The metals have rocked since 2025 as capital rotated out of fiat currencies and sovereign bonds and into hard assets with the dollar weakness, geopolitical stress, unconscionable U.S. debt from no fiscal discipline, and uncertain U.S. policy.

However, the bubble popped in the short term right from Thursday’s gap higher.  A violent selloff sent prices crashing to their biggest one-day dollar decline on record.  Silver prices fell 31%, their sharpest drop since March 1980, when the Hunt brothers tried to corner the market.

Regardless of the narrative attached to the move—whether it was Fed speculation or political commentary—the price action itself was textbook: an overextended trend meeting panic liquidation. When markets reach that point, the bullish reasoning is over. It becomes a “sell at any price” event.

Microsoft’s earnings and guidance triggered a sharp drop. The stock gapped lower by nearly 10%, and the damage didn’t stay contained! Software ETFs such as IGV and XSW were dragged into bear-market territory (IGV is more than 20% below its October high), with no meaningful bottoming action evident. That type of price behavior implies further downside risk rather than immediate stabilization.

Bitcoin and Ethereum both broke below two-month support levels. Sideways consolidation since mid-October resolved lower last week, signaling buyer exhaustion. Unless these moves prove to be breakdown failures—and quickly—the path of least resistance points to lower prices, potentially through a waterfall-type decline. As we finalize this report, /BTC is trading at 77,500, a big drop from Friday's price at 4 ET. 

Looking ahead, economic data next week—particularly inflation-related reports—could easily act as a catalyst for another short-term swing. If the S&P 500 decisively breaches 6,900, the odds increase for a move toward 6,800.

Internal market gauges remain neutral, which is important. They are not signaling risk-off, but they are not providing a strong tailwind either. Breadth remains below the zero line, confirming that most stocks are underperforming, even as indices hold up.

That divergence is both a warning and an opportunity. If money rotates into laggards, breadth can improve without indices collapsing. If it doesn’t, leadership deterioration becomes more dangerous.

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.

2/2:  HD – Over $377.09, consider shorting Feb (2/6) $365/360 bull put credit spread for a limit of $.60/share (currently $.73/share).    Buy Setup and reversal at the 20/200-MA.  Stop $367.48 (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).

2/2:  SLV – Over $78.50 (intra-day resistance), consider shorting Feb (2/2) $69/59 bull put credit spread for a limit of $1.00/share (closed at $1.27/share).    Major Selloff to 50-MA, Climactic Buy Setup and reversal on the 15-Min.  Stop $68.98 (however, stop out of position if the “debit/cost to close” the spread reaches 2x premium received, which would be $2.00/share in this case, which means that you are not risking more than 1:1).

2/2:  HUM – Over $198.00, consider shorting Feb (2/6) $190/182.5 bull put credit spread for a limit of $1.25/share (closed at $1.52/share).    Climactic Buy Setup and reversal, Breakout on the 65-Min.  Stop $189.98 (however, stop out of position if the “debit/cost to close” the spread reaches 2x premium received, which would be $2.50/share in this case, which means that you are not risking more than 1:1).

2/2:  SNDK (and MU) - bear call credit spread setups but spready.

NOTE:   We found many compelling patterns for directional trades which are contained in our Advisory Swing and Options Trader, see below.  All directional patterns are credit spread CANDIDATES provided they are liquid and have attractive net credit for the DTE.  In this case, every one of these unfortunately have illiquid options, preventing us from presenting credit spread ideas.

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.