Embrace the Hard Trades

Sean McLaughlin
September 8, 2023

While in the process of preparing for this week’s live Options Jam Session, I came across an open trade in $HMC that has been performing quite well for us.

It reminded me that when I wrote about the trade back on May 15th for subscribers, I began the piece with this:

I’m filing today’s trade under the category of “Hard Trades.” Not because it’s particularly hard to execute or because it’s a complicated multi-legged spread. It won’t require an excessive amount of margin to get positioned nor is there any risk of unlimited losses.

It’s hard because people might look at the trading action of the past few days and think that it’s “gone too far” and “I should wait for a pullback.”

And traders who think that way may be right.

But here’s the thing: sometimes the best trades to get into are the best precisely because they are the “hardest” to pull the trigger on. And that’s where our opportunity is. Those of us who fight through the conventional wisdom of average traders and get positioned ahead of the crowd will be lifted later on by those same traders who were “waiting for a pullback” and put an ever-rising bid underneath our stock that fuels our future gains.

Today’s trade might be one of those setups.

And here was the chart of $HMC at the time:

Turns out, doing the hard thing was the right thing to do after all! Here’s an updated version of this chart:

$HMC had an initial thrust that allowed us to sell half of our position at a double in just two weeks. We then had to endure a couple of months of sloppy sideways digestion, and now we find ourselves enjoying another leg higher.

“Hard” doesn’t mean wrong. Nor does hard mean it’s irresponsible. It simply means that we’ll have to earn it. And when we do, the rewards often make the effort worthwhile.

“Hard” things shouldn’t be avoided. If anything, they should be embraced.

Trade 'em Well,

Sean McLaughlin
Chief Options Strategist
All Star Charts, Technical Analysis Research

 

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