Good morning, tradersโฆ
Ben here.
This Santa Claus Rally is making me feel like my kids on Christmas morning.
Stocks have been grinding higher in a way that feels almost effortless. This is the kind of tape where opportunities are everywhere.
Itโs not just that stocks are up โ theyโre moving somewhat predictably and respecting technical indicators โ creating a great environment to capitalize on bullish setups.
This is a chance to catch clean pullbacks, high-volume breakouts, and clear directional trades with confidence and conviction.
Better yet, volatility is low. Usually, market environments with big moves lead to higher implied volatility, jacking up the price of options. But right now, contracts are still pretty cheap.
Thatโs a gift for options traders looking to go long. You can position for near-to-mid-term swing trades (from the SPYDER Scanner) or day trades (from the APEX Scanner) without paying a hefty premium for the right to enjoy the move.
Iโm having a lot of success in this market, and I hope you are too. When we see this kind of rhythm โ slow, steady, and bullish โ itโs not the time to sit on the sidelines.
Instead, itโs time to weaponize the tools we have at our fingertips to make as much money as possible while the price action is this strong.
Today, Iโll show you five ways to capitalize on this incredible moment in the options marketโฆ
1. Capitalize on Low Volatility
Implied volatility (IV) is currently low, with the CBOE Volatility Index (VIX) sitting around $15. This means options are very affordable and if you get the right entry, they have a lot of room to run.
For directional traders, this is a gold mine. When you buy calls in this environment, you donโt need the stock to make a massive move for your trade to become profitable.
This low-IV backdrop makes near- and mid-term swing trades especially attractiveโฆ
EXAMPLE: I just closed out a trade on Cisco Systems Inc. (NASDAQ: CSCO) 12/20/24 $57.50 Calls that I bought at $1.38 and sold at $2.17 for an easy, simple, 57% gain.*
Just look at how beautiful this chart has been for the past six months:
If a stock is setting up with a clean pullback or looks ready to break out, you can take a position without overpaying for the premium.
Unlike high-volatility markets, youโre not fighting against inflated option prices or worrying about IV crush eating away at your gains.
2. Watch for Pullbacks
Pullbacks often set up the best opportunities in a steady, bullish market like this one.
Stocks donโt move in a straight line up โ even the most bullish charts look more like stairs. They need to take a breather and move sideways now and then.
This happens over and over again. A strong pullback to a support level gives you a low-risk entry with plenty of upside potential.
You want to see a lower-volume pullback, holding key support, like a moving average or previous breakout level.
Thatโs often a sign that sellers are taking a pause, not taking over. Once buyers step back in, the stock can continue higher.
Practical Tip: Donโt chase stocks that are way overextended above the short-term moving averages. Wait for pullbacks to support levels where you can enter with a defined risk and better reward potential.
3. Day Traders: Take Advantage of Predictability
For day traders, this market is about as good as it gets. The trends are smooth, and thereโs been very little chop intraday.
Breakouts are holding, pullbacks are clean, and the moves are following throughโexactly what you want when youโre looking for quick setups.
The low volatility also means that day-trade options are more affordable. You can target near-the-money calls or puts without paying a massive premium, making it easier to capture gains without needing outsized moves.
Practical Tip: If youโre day trading, stick to stocks in hot sectors with strong volume and clean trends. Breakout levels and intraday pullbacks are offering great opportunities for quick moves.
4. Ride the Hype, Donโt Buy the Hypeโฆ
The Santa Claus Rally is a very reliable seasonal pattern, but that doesnโt mean itโs unstoppableโฆ
This run canโt last forever, and thereโs always the chance of a major index pullback โ especially after a strong run.
The key is to balance confidence and caution. Use a repeatable process for each trade: know where youโre getting in, where youโre getting out, and how much youโre risking.
If a trade doesnโt work, cut it quickly and move on. The opportunities are plentiful in this tape, so thereโs no reason to waste time, money, and opportunity hanging onto losers.
Practical Tip: Stick to setups with clear risk-reward. Donโt let FOMO push you into chasing moves that are already overextended.
5. Look for Breakout Candidates
Breakouts are shining in this environment. When a stock clears resistance, thereโs been plenty of follow-through to keep the move going. If volume picks up on the breakout, thatโs your signal that buyers are in control.
To find breakout setups, look for stocks trading near resistance levels with tightening ranges. When a breakout happens, you can take a position with a well-defined stop and let the stock do its thing.
EXAMPLE: On Monday, I saw Robinhood Markets Inc. (NASDAQ: HOOD) โ one of the strongest momentum runners of this rally โ breaking out of a key price level at $41.70. I bought 12/20/24 $42 Calls for $1.15 right on the breakout and sold them a few hours later for $2.30, a 100% gain intraday.*
Practical Tip: Breakouts are working well right now, but focus on clean charts and confirmation. Higher-than-average volume on a breakout is a good sign that the move has strength.
This kind of tape doesnโt come around every day. The combination of steady bullish momentum and low volatility is a sweet spot for options traders looking to capitalize on directional moves.
Itโs time to take advantage of cheap options premiums, focus on clean setups like pullbacks and breakouts, and trade with discipline.
This is a great environment to be active and intentional โ just donโt let FOMO steer you away from smart trades.
The marketโs offering some holiday cheer right now, so letโs make the most of it.
Happy trading,
Ben Sturgill
P.S. Stop guessing what trades might work โฆ and start winning with the Smart Money.
Join my buddy Danny Phee THIS MORNING, December 18 at 9 a.m. EST to see how weโre trading the biggest Smart Money bets of the week.
This is your last chance โ Click here to reserve your seat!
*Past performance does not indicate future results
