Thanks for joining me on Thursday.
I promised you real trade ideas. Not theory. Not generic advice about "the trend is your friend."
If you missed it, here's what we covered: three trades built for protection first, growth second. The kind of setups I use for retirement capital that can't afford big drawdowns.
You can watch the full replay here.
Let me walk you through each one.
Keep in mind these prices I’m quoting are based on midday Friday, so they can change by the time you look at them.
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The Market Nobody's Watching
Before we get to the trades, you need to see what I'm seeing.
Most traders obsess over daily charts. I'm watching something bigger: where is capital actually flowing?
Money doesn't disappear from markets. It rotates. Equities to bonds. Commodities to cash. Understanding this rotation tells you where to position.
Right now? Equities strong. Commodities strong (mostly gold carrying that sector). Bonds and the dollar sitting at multi-year lows.
But here's the interesting part: energy just crossed seven other sectors in six weeks. It went from dead last to fourth place in relative strength.
That's not noise. That's institutional money moving in.
Healthcare stayed at the top. Technology holding strong. But energy's dramatic improvement? That's the signal most traders miss.
Trade 1: Gilead Sciences (GILD)
The Setup: Healthcare sector leader with a 2.5% dividend, clean uptrend, sitting at support after a pullback.
IV Rank: 17 percentile. Options are cheap. This is a buying opportunity, not a selling one.
The Trade Structure:
- Buy Jan 16 120 call: $6.65
- Sell Dec 27 126 call: $1.80
- Net debit: $4.22
Why This Works:
The short-term call you sell collects time decay. The long-term call you buy captures the move higher. If Gilead sits still, you roll the short call from December into January and collect another $1.80.
After one roll, your effective cost drops to approximately $2.80 on a $6 wide spread.
If it climbs and gets called away at $126? You capture the full spread value. That's better than 100% return on risk.
If it stays flat? You're profitable above $122.80, which is above the current price.
The Alternative:
Don't like diagonals? Buy the stock at $123.50. Collect the $0.79 dividend on December 15th. Then sell the Dec 27 127 call for about $1.71.
You just collected the dividend plus 1.5% in premium in one month. Do that every month, and you're generating 18% annually in premium alone, plus quarterly dividends.
Trade 2: Valero Energy (VLO)
The Setup: Energy sector showing massive improvement. Valero's chart keeps making higher highs even while oil sits near $60.
Here's what most traders miss: these companies don't need oil to rally. They're profitable at current prices. If oil goes higher, margins expand. But they're fine either way.
IV Rank: 9 percentile overall, but the January monthly expiration shows 37.5% IV versus 31.9% for the weekly. That's a temporary spike we can exploit.
The Trade Structure:
- Sell Jan 16 175 put
- Buy Jan 16 140 put
- Credit collected: $6.25
- Buying power required: $2,875
Why This Works:
Your break-even sits at $168.65. The stock trades at $176.
That's a $7.35 cushion. VLO needs to fall 4.2% before you lose a single penny.
Look at the chart. That break-even sits well below recent support. You're collecting $6.25 against $2,875 at risk. That's 2.17% in 43 days, or 18.4% annualized.
And you're doing it in a sector that just became one of the top four performers after being the weakest six weeks ago.
Why Not Naked Puts?
You could sell the 175 put naked for $5.35. But that requires $17,500 in buying power. The spread version collects $6.25 and only requires $2,875.
Same profit potential. Defined risk. 84% less capital required.
Trade 3: ExxonMobil (XOM)
The Setup: IV Rank is below 10. Options are historically cheap. This is pure directional opportunity.
XOM pays a 3.5% dividend, but we just passed the ex-date. Next payment isn't until February. So instead of buying stock, we're buying leverage.
The Trade Structure:
Two options depending on your risk tolerance:
Aggressive: Buy Feb 120 calls at $3.77 (45 delta)
Conservative: Buy Feb 125 calls at $1.95 (29 delta)
Why This Works:
The 120 calls need XOM to rally just $2.50 to break even. The 125 calls need a bigger move but risk less capital.
With IV this low, you're getting exposure to a potential 5-10% move in the stock for a fraction of the cost. If energy continues improving and oil catches any bid, this position could return multiples on invested capital.
Risk? You know exactly what it is: $377 per contract (aggressive) or $195 per contract (conservative). That's it. Your maximum loss is defined before you enter.
During the session, we discussed buying in-the-money calls and selling out-of-the-money calls to create a debit spread. However, we capture a near identical delta simply by buying the $120 calls.
The Philosophy Behind These Trades
I separate my trading into two buckets.
The growth pile: aggressive positions, futures, quick in-and-out trades. That capital is meant to compound fast.
The protect pile: retirement money that can't afford big drawdowns. For this capital, I want strong fundamentals, dividend support, technical confirmation, and risk-defined structures.
These three trades fit the protect pile perfectly.
Gilead: dividend income plus growth potential in the market's strongest sector.
Valero: high-probability premium collection in an improving sector with 4% downside cushion.
XOM: leveraged upside exposure when options are historically cheap with defined risk.
None of these require perfect timing. They're designed to work in sideways markets, modest rallies, even small pullbacks.
The structure in each case either collects premium, benefits from time decay, or provides significant downside cushion before capital is at risk.
What Happens Next
I'll be tracking all three positions in upcoming newsletters. You'll see the entries, any adjustments, rolls, and exits.
No theory. Just real-time execution.
If these setups make sense to you, you're thinking about risk the right way. Most traders optimize for maximum gain. I optimize for maximum safety with acceptable returns.
That's how you compound wealth over decades instead of blowing up accounts every few years.
Watch the full session here to see the complete chart analysis and Q&A.
Next week, I'll break down what I'm watching heading into December and why sector rotation matters more than most traders realize.
Don't fight the river. Position yourself to move with the current.
Right now, that current flows toward equities, specific sectors showing relative strength, and companies with fundamentals that can weather anything.
Blake Young
Retirement Strategist, TheoTrade