This sleepy sector could offer big returns, says Mike Khouw
The options market rarely gives you a gift, but it might be doing that right now.
TL;DR
- The Materials sector is outperforming the S&P 500 this year, with a nearly 17% gain.
- Drivers for the sector's performance include AI infrastructure buildout and precious metals demand.
- Implied volatility for one-month at-the-money options on the XLB ETF is currently low, near its five-year low.
- Low implied volatility means cheaper options premiums, reducing risk for directional bets.
- Traders can buy calls or puts outright for bullish or bearish positions, respectively, with limited risk.