I’m in the process of creating a formal “business plan” for one of my trading strategies.
In 2002, I went through an arduous experience of creating an operating agreement, disclosure documents, and strategy explainers to attract investors as I built a small commodities hedge fund from scratch. Ignorance was bliss.
It was a chore, but a worthwhile investment in my time and energy because I ultimately won the business and started the fund. Success!
Now I’m entertaining the idea of managing OPM (other people’s money) again, and I’m reminded of the rewards of this process.
For a swing trader like me, earnings season is always tough. I often find myself in a situation where my favorite setups have a looming earnings release on the nearby horizon, introducing binary risks that make me uncomfortable.
And this season is no different. All of my favorite setups right now are fraught with earnings risk.
But I've found one opportunity where a pending earnings release may actually benefit us, allowing us to get positioned at attractive prices for a post-earnings run.
It used to be a big day. Back in the day (cue old person lecturing) we used to only have monthly options expirations. And because of this, the third Friday of every month tended to offer up some fireworks on the regular.
These days, daily expiring index options and weekly expiring stock options have kinda taken the starch out of the monthly happening. Boo.
Call me old fashioned (just don’t call me old!), but I still prefer to do my directional options trades – and most of my delta-neutral option spreads – in regular ol’ monthly expirations. And there seem to be plenty of traders out there like me because we still see the majority of the open interest in the monthlies.
I’m bringing this up because I’ve got some April long calls on the books that are still working for me (barely).
On Monday evening, my family ordered some takeout barbeque from the local joint here in town. Everything was delicious and I went to bed that night feeling just fine.
But I awoke around 1 a.m. to a twisting feeling in my stomach. Before long I was keeled over my bathroom toilet, puking my guts out. I wasn’t able to sleep at all, as I always felt I was moments away from hurling again.
The upchucking eventually subsided by sunrise, but I was left battling a ping-pong game of sweaty overheating and teeth-chattering cold shivers. All of this continued in between bouts of near-total unconsciousness as I could barely get myself out of bed for more than five or ten minutes at a time.
And when I was able to get on my feet, every muscle in my body ached and it took a herculean effort to put one foot in front of the other in a feeble attempt of movement that looked something like walking. It was as if I’d suddenly aged 40 years and needed a walker.
Food poisoning is a bitch. It was worse than I ever felt when I had Covid a year ago. Way worse.
Did you know Motorola has been around since long before the cellular phone?
In the late 90's and early 2000's, Motorola was one of the go-to cell phone manufacturers. I owned several, personally. To this day, I still maintain that I've never had a clearer signal with zero audio delay than I did with my Motorola StarTac phone circa 2001.
This all came up this morning when internally, while discussing the setup in the $MSI stock, we were all kind of surprised that Motorola, based in Chicago, is a one-hundred year old company! Wow.
Clearly, this is a company that has gone through many pivots to lead new technology development.
Of more immediate concern to us options traders is we've got two potential catalysts that can drive some quick gains for us.
I recently came across a video on youtube from a very smart man – whom I respect and have had several favorable interactions with – that made me shake my head.
But before I throw any shade on any other professional colleague, let me be the first to say that I’m no genius. My shit stinks too, and I’m sure I’m equally guilty of throwing questionable ideas or thoughts out into the metaverse from time to time. I’m human, just like everyone else.
So here’s what got me rankled.
The video had a catchy title like: “How I made fourteen hundred dollars in one day trading 0-DTE options.”
Ok. I’m interested. I like to make that kinda money each trading day. Tell me more!
The short video went on to demonstrate how this trader sold a slightly out-of-the-money naked put in $SPX options expiring that same day – a day in which SPX rallied from start to finish making the put expire worthless. This allowed the trader to keep the $1400 he collected from selling that one put contract short near the open of trading that day. That’s pure profit, baby!
Cool. Great trade!
But here’s the thing. Actually, here are several things…
We kicked around a few ideas in this morning's Analyst meeting and the one thing that stood out to me is that I do not currently have any long exposure to the healthcare sector --- one of the strongest sectors out there.
That changes today.
We're going to get long a familiar name in the space, but we're going to do it carefully with a defined risk spread because we've got earnings coming up soon. So we'll go for a longer-duration trade and bet on earnings to be a catalyst for higher prices.
Strazza and I have been having fun discussing options stuff on Twitter Spaces over the past few weeks. Even our friend Brian Lund (@bclund) has been contributing mightily to the conversations.
The topic of discussion has mostly centered around 0-DTE – or daily expiring – options and some experimentation I’ve been doing in this very active corner of the options market. While I will continue to talk about that, we decided we want to broaden out the topic material to include anything else we’re seeing that we can trade with options.
We’ll discuss trades we have on, trades we might be considering entering or anything else that feels topical in the world of options.
During the calls, we like to encourage audience participation. One piece of feedback I’ve heard from a few of you is that you don’t know how to actually participate. “Where’s the button to raise my hand?”
Aha! moments often occur when we are faced with a problem or a situation that requires us to think outside the box. They can happen when we are struggling to find a solution to a problem, and suddenly, a new idea pops into our heads.
Think about the story of Archimedes, who had an Aha! moment when he saw the water in his bathtub overflow. Suddenly, he realized that the volume of an object can be measured by the amount of water it displaces.
Another example of an Aha! moment is when we finally understand a concept that we have been struggling with for a long time. It can be a concept in mathematics, science, or even in our personal lives. For me, they often happen in my world of trading.
In fact, I would argue that a career spent engaged in trading the markets by definition is a career defined by hops from one Aha! moment to the next.
