Don Kaufman here.
Just wrapped up another appearance on Schwab's Big 3, and I've got to tell you - this was one of those sessions where the obvious plays and the smart plays were pointing in completely opposite directions.
You know me. I love finding opportunity where everyone else sees disaster.
The Government Shutdown Nobody Cares About
First things first - all this noise about the government shutdown? The market's basically shrugging it off. It's business as usual in the "circle of life" as I'm calling it now. Oracle talking to OpenAI, throw some Nvidia in there... the cycle just keeps spinning.
But here's where it gets interesting for traders like us.
Three Setups That Caught My Eye
I brought three completely different plays to the table today, and honestly, they tell the story of where we are right now better than any market commentary could.
Play #1: Following the Obvious Trend
Sometimes as a trader, you just have to be objective and jump on what's working. We've got a major retailer that's been getting absolutely hammered - down from 275 and showing zero signs of letting up.
With potential economic headwinds and the reality that home improvement projects are usually the first thing people cut when times get tight, I'm not fighting this downtrend. November 7th expiration, defined risk, betting on continuation.
The technical setup couldn't be clearer if it tried.
Play #2: The Contrarian Setup (My Favorite Kind)
Now here's where things get fun. I found a chart so ugly, Rick was about to paint what he called "a fairly hideous picture." Down 35% year-to-date, absolutely tanking.
But you know what I saw when I looked under the hood?
The options marketplace was screaming. Implied volatility spiked so high it looked like earnings were coming out. When IV gets that extreme, it usually means one thing: traders are panic-buying put protection.
And that's often where you find short-term bottoms.
So while everyone's running for the exits, I'm doing the exact opposite. November 21st expiration, looking for a bounce. Not calling a major reversal - just betting that sometimes the pendulum swings too far.
Play #3: Standing in Front of a Freight Train
This one's my favorite. We've got a name that's up over 100% year-to-date, absolutely parabolic, looking unstoppable.
Most traders would chase momentum here. But I'm looking at two critical factors nobody else is watching:
First, the weekly expected moves have been exceeded four consecutive weeks. Think about that - the options market has been completely wrong about how much this thing should move, four weeks running.
Second, the implied volatility skew has flipped, showing risk to the upside. When you combine those two factors? That's often your setup for a pullback.
I'm literally standing in the way of the freight train here, but I'm doing it with defined risk and plenty of time. December 19th expiration - giving myself the gift of duration because even a mild pullback can be significant when you're dealing with a stock this extended.
Why I Love Setups Like These
Look, anyone can follow a trend or chase momentum. But the real money is made when you can spot the subtle shifts that most traders miss.
The options marketplace tells you stories the charts can't. Implied volatility patterns, expected move violations, skew changes - these are the early warning signals that set up the best contrarian plays.
The Bottom Line
Three trades, three completely different approaches:
- One trend-following momentum play
- One contrarian bounce setup
- One parabolic pullback bet
The beauty is in the diversity. Markets give you different opportunities, and the key is recognizing which setup you're looking at and positioning accordingly.
Want to see exactly how I structured these trades, including the specific strikes and spreads? I broke down all the mechanics and risk parameters in detail during the Big 3 segment.
To your success,
Don Kaufman