Why I Buy Both Sides: A Smarter Way to Trade Stock Divergence

The vast majority of what I hear from experts in the investing world is about predicting stock’s direction.

A hot stock here or a secret indicator there…

Nothing wrong with good analysis – trust me, I spend a lot of time doing it – but the regular approach of buying calls or puts and hoping the market moves enough in your favor to pay you off is a tough game.

I almost never do it.

In fact, the only strategy I consistently trade “regular” options is where I am not predicting direction at all.

You’ve probably heard me talk about these “pair” trades before.

They are great for fast-moving markets like we have right now…

Instead of trying to guess what the market will do as a whole, I look for two stocks moving in opposite directions within the same sector. Then I build a trade around those two ideas — buying calls on the strong name, and puts on the weak one.

So in this case, I am not trying to time up the right move on the right stock at the right time.

I am, instead, jumping into the market with more ways to win than that. If the hot stock keeps rolling (like the one on PLTR we just closed), it’s great. If the whole sector flushes and the weak stock crumbles, great.

Let’s take a recent example:

✅ AVGO was breaking out to new all-time highs.

❌ IBM had just dropped post-earnings and was drifting lower while the rest of tech rallied.

They’re both in the same sector. They often move together. But right now? They’re going in opposite directions.

That short-term divergence is where the edge lives.

So instead of trying to pick which stock would move more, or building something complex like a ratio spread or an arbitrage trade…

I just bought the $300 calls on AVGO and the $260 puts on IBM — both expiring September 19.

Now I’ve got clear risk on each side, a simple trade structure, and a time horizon where lots of different outcomes benefit me.

If AVGO continues higher, the calls work.

If IBM keeps dropping, the puts work.

And if both moves happen at the same time — even better.

But that begs a question: why not use a spread?

Spreads can be great. I use them all the time — especially when I want to reduce cost or lock in defined risk.

But in these profit pair trades, I often want exposure to maximum momentum.

And when I expect a quick directional move — especially in a name like AVGO that can pop 2–3% in a single session — I don’t want to cap the upside with a short leg.

Buying the option outright gives me flexibility.

If the move happens fast, I can scale out.

If it takes time to develop, I’m still in the game.

Plus, with both sides bought as simple calls and puts, I’m not relying on correlations or guessing where the broader market is headed.

I’m just saying: this stock is strong. That stock is weak.

Let’s trade both.

Of course, you have to manage risk — especially since you’re buying premium on both sides.

The key is position sizing.

If I’d normally put $1,000 into a single directional trade, I might split that between both legs — $500 on the long side, $500 on the short.

That way, even if one leg fizzles out, the other can still more than make up for it.

And since they’re moving in different directions, I’ve got built-in diversification within the trade.

Here’s the bottom line with this type of trading.

When a sector diverges, and one stock clearly outperforms while another breaks down, a profit pair trade is one of the cleanest ways to express the idea.

Keep the structure simple.

Buy both sides outright.

Let the price action do the work.

If you’re tired of guessing what the market will do — start focusing on what individual stocks are doing.

Then trade the leaders and the laggards.

That’s where the edge lives.

— Nate Tucci

P.S. See setups like this and much more every weekday at 10am ET in the Opening Playbook. Don’t miss it!