In today's Flow Show, Steve Strazza and I assess the current market environment, post- whatever the hell we're calling what happened a couple weeks ago (Volmageddon 2?, Yen YoYo? The Carry Drop?).
It feels more and more like that was merely a footnote to an otherwise pretty robust bull market. We'll see.
Regardless, we're looking for bullish setups in this tape and an online retailer out of South Korea has our attention.
When the storm is upon us, it's too late to purchase hurricane insurance. Nobody will sell it to you. Of if they will, the prices will be obscene.
Last Monday, when the VIX printed a 65 -- it was too late to buy downside protection. If you did, you were asking for your face to be ripped off. And it likely was.
Now that the dust has settled a bit, volatility has abated significantly, and the relative winners and loses sorted themselves out, we're seeing some good setups to position ourselves for any additional downside action.
Additionally, it offers me a good chance to balance out some of the risks I still have on the books in my long positions.
A surprising outcome for some of my defined-risk long delta trades this week is that my losses weren’t as pronounced as I would’ve expected given the vicious sell-off we’ve seen in many tech names.
Why?
One thing that isn’t often discussed about being long options premium when expressing bullish or bearish bets is that owning long options (calls or puts) also means we’re long volatility.
In situations like these where we saw VIX briefly with a 65-handle, the rapid rise in options premiums put a floor in many of the calls I had long positions in. So while many bullish positions in my portfolio were losing money, the losses were rather pedestrian relative to what others who were holding long stock or futures positions were likely experiencing.
It’s not a win, but it felt like one this week.
We discuss this and a whole lot more in this week’s Options Jam Session:
What do you do when the stock market sh*t hits the fan?
Be honest.
Do you tend to freak out and panic into quick exits? (if so, you aren’t alone!)
Do you recoil in fear and call it “zen detachment?” (there are more of these than you know!)
Do you get busy reading everything you can, talking to everyone you can, and watching all the financial TV you can to try to figure out why this volatility is happening?
Do you stoically go down with the ship turning your trades into investments?
We all have our different ways of dealing with the mental volatility that stock market volatility stokes in all of us. These past couple of weeks have revealed new things to ourselves.
What do you call a blend of systematic and discretionary trading?
Systionary trading?
Discretionatic trading?
I think I’m leaning towards the latter.
Early in my trading career, I started up a small commodity futures hedge fund and prided myself on being fully systematic.
An algorithm derived the signals, I entered each trade manually, and I honored each signal religiously. To my credit, I stuck with it, no matter what. And I was rewarded for doing so, earning my investors 58% net returns on their money (net of my 2/20 performance fees) in just 18 months.
So, it was ingrained in me early on that systematic trading was good for me. It kept my emotions out of the decision-making process.
I’ve been chasing the systematic dragon in index options trading ever since.
In today's Flow Show, Steve and I put our heads together to find a good trade to take advantage of elevated options premiums in a big-cap name that may have seen the worst of the selling and is now may be putting in a pivot.
That name is Amazon $AMZN and here's the chart where it stands right now:
In today's episode of The Flow Show, me and Steve Strazza talk about the uniquely interesting market we currently find ourselves in, and we delve into a sector that appears to be making a long overdue turn higher, and a stock within the sector that is positioned for a potentially monster breakout.
Here's the big picture setup of Viking Therapeutics $VKTX:
When Michael Nauss first sat down at a trading desk, his computer had a keyboard and a screen. But no mouse.
And his screen displayed an order book. But no charts.
Thus began his career as a scalper working the order book, who paid no attention at all to trends or technical analysis. He was simply trying to find spots to buy ahead of large buyers and flip the position out for a quick couple of ticks. Do this a couple hundred times per trading session and perhaps he’d have a successful day.
This was all part of Michael’s journey of learning to walk before he could run. And it is a mantra that sticks with him to this day as he himself continues to learn and helps many others learn the craft of trading.
Michael says: “Learning is often about “UN” learning.“
People are frequently drawn to trading by a social media personality or a brokerage advertisement, and they are like moths to the flame of fast riches and early retirement. Then they lose.
We love our bottoms-up scans here at All Star Charts. We tend to get really creative when making new universes as we want to be sure they will deliver us the best opportunities the market has to offer.
However, when it comes to this one, it couldn't be any simpler!
With the goal of finding more bullish setups, we have decided to expand one of our favorite scans and broaden our regular coverage of the largest US stocks.
Welcome to The Junior Hall of Famers.
This scan is composed of the next 150 largest stocks by market cap, those that come after the top 150 and are thus covered by the Hall of Famers universe. Many of these names will someday graduate and join our original Hall Of Famers list. The idea here is to catch these big trends as early on as possible.
There is no need to overcomplicate things. Market cap is a quality filter at the end of the day. It only grows if price is rising. That's good enough for us.
But if we expect it to continue, then we're going to need to see some rotation into some new sectors to bring fresh cash into the market and keep the wave going.
One sector that my Analysts feel has the potential to pick up the slack is Precious Metals. And the name that Steve Strazza and I discussed on today's Flow Show has the potential to ride the sector wave as well as play catch up to its big brother Gold.
[$NKE] appears to be hanging on the precipice of a potentially large fall. The company will be announcing earnings [in late June] and I think that might be the final nail in the coffin to send this stock lower (if not sooner).
In today's Flow Show, Steve Strazza served up the opportunity that is revealing itself in the financials space.
So we looked for some vehicles to express our bullish thesis, while being mindful of upcoming earnings releases that will be kicking of earnings season in less than two weeks.
This is no time to enter trades with undefined risk. But if we can minimize the volatility, it would be best to consider those options.
We think we have just the right idea in Morgan Stanley.
