Good morning, traders…

Ben here.

Tech stocks took a massive dip on Tuesday as the NASDAQ was down more than 3% intraday.

It may have been due to volatility around impending rate cuts, The September Effect, geopolitical concerns, or corporate earnings.

But rather than trying to speculate about the “why,” I’m focusing on the “how” — that is, how we make money trading options in this tape.

And when high-flying tech stocks have a major reversal to the downside, there are usually some beautiful pullback and breakout setups waiting in the wings.

From there, it’s all about identifying key levels, picking the right contracts, and timing your entries and exits to perfection. 

Today, I want to walk you through two trades I called out in yesterday’s Daily Strike Alliance Webinar: Verizon Communications Inc. (NYSE: VZ) and Nvidia Corporation (NASDAQ: NVDA). 

I’ll break down what made each of them attractive, how I secured big gains in less than an hour, and some tips on how to nail similar setups in your own trading…

VZ Trade: Why I Called It Out

Let’s start with going over why I traded VZ yesterday:

1. This trade appeared on the APEX Scanner. The APEX scanner is one of the tools I rely on to find high-potential setups. When I see something come up here, I pay attention.
2. It had a bullish setup with higher lows. This indicates that buyers are stepping in at higher and higher levels, suggesting the stock is gaining strength.
3. Consolidation into continuation. The stock was in a period of consolidation, meaning it had been trading in a range, but I expected a breakout in the same upward direction. Consolidation phases often lead to strong moves when they break out.

The Trigger: What Was the Entry?

For VZ, the entry trigger was the break of the premarket high. This is a key signal in many of my trades, as it suggests the stock has enough strength to push beyond its initial resistance level.

I was looking for the $43 break and got that right at the open. (If you want to see how to identify these premarket levels on your charts, I’ve shared a helpful TOS study that shows premarket highs and lows. Check it out here.)

I bought the VZ 09/06/2024 $43 calls at $0.31. 

Just two minutes later, I sold a batch of contracts for $0.40 — a gain of 29%.

Later in the day, VZ absolutely cratered back towards the pre-market lows. This shows the importance of being disciplined with your scaling out and stop-losses in this market.

Another tool I use is the swing high/swing low indicator to help target buy and stop levels. (You can find that indicator here.)

NVDA Trade: Why I Called It Out

Now, let’s look at the NVDA trade. Why did I target this one?

1. Smart money was hitting it hard. The 108 and 110 calls were coming through on the scanner, showing that large traders were confident in a bullish move.
2. A bullish setup with higher highs and higher lows. Just like VZ, this showed that NVDA was in a strong uptrend.
3. Strength on the QQQ. Nvidia is a major component of the QQQ (an ETF that tracks the NASDAQ), and when the QQQ is showing strength, stocks like NVDA often follow suit.

The Trigger: What Was the Entry?

The entry trigger for NVDA was also the break of the premarket high at $107.90. When this level was broken, it signaled that buyers were ready to push the price higher:

A quick note for day trading: you can use either the premarket high/low (which includes all price action before the open) or the opening range high/low (which covers the first 30 minutes of trading) to enter trades. 

A break of the premarket levels is often the first sign, while a break of the opening range is a confirmation of strength. In this case, NVDA broke both, which reinforced the trade.

I bought NVDA 09/06/2024 $108 calls for $2.53. 

Only 31 minutes later, I sold a batch for $3.10 — a gain of 22%.

Another area to always keep an eye on is market internals — things like the Advance/Decline Line, the CBOE Volatility Index (VIX), and overall market sentiment. 

When market internals are strong, it helps validate call trades like these.

I’ve shared some helpful ThinkorSwim (TOS) tools in this post, and I’ll walk you through how to use them next week. Here’s a flexible grid that can help you analyze your charts: Check it out here.

The TTM Squeeze

Another pattern I’m watching for right now is the TTM Squeeze. 

This indicator shows when price and volatility are compressing, which often signals that the stock is resting before making a big move.

When a stock breaks out of this “resting” period, it’s usually followed by a strong move in the direction it was already going (this is a basic concept from Dow Theory). 

The longer the stock consolidates, the bigger the breakout is likely to be.

You can use the TTM Squeeze on any time frame to identify consolidation and continuation setups — and the best part is that it works for both puts and calls.

All of these methods are there to help you simplify the complex world of options…

Trading can feel overwhelming with all the different tools and strategies available, but I hope breaking it down step by step has helped clarify the process. 

Keep practicing, use the resources at your disposal, and soon enough, these setups will come as second nature.

Now, before we go, let’s look at:

💰The Biggest Smart-Money Bets of the Day💰

• $4 million bearish bet on DKNG 12/20/2024 $43 calls @ $1.22 avg. (seen on 9/4)

• $2.8 million bullish bet on X 10/18/2024 $35 puts @ $2.80 avg. (seen on 9/4)

• $1.48 million bullish bet on BAC 01/17/2025 $41 calls @ $2.47 avg. (seen on 3/26)

Happy trading,

Ben Sturgill

P.S. Don’t wait until Monday to find out what the ‘smart money’ is doing…

Join Danny Phee THIS SUNDAY, September 8 at 1 p.m. EST to see the biggest options bets of the week. 

Seats are limited — reserve yours before it’s too late!

*Past performance does not indicate future results