My family and I recently embarked on a memorable 4-day journey to Redwoods National & State Parks in the breathtakingly rugged landscape of extreme Northern California.
Words alone cannot do justice to the majesty of this region, nor can mere photographs fully encapsulate its grandeur. To truly grasp its magnificence, one must stand amidst the towering coastal redwood trees, with the rugged shoreline of Northern California stretching out before them, enveloped in the sights, sounds, and scents of one of the most remarkable forests on Earth.
Even the gentle rain that occasionally graced our adventure served to enhance rather than dampen our experience, intensifying the assault on our senses in the most fulfilling manner imaginable.
As we spent hours traversing the labyrinthine trails, venturing deep into the heart of the woods, a recurring reminder echoed among us: "Don't forget to look up!"
In today's Flow Show, Steve Strazza laid out the case of how both the Nasdaq 100 and Chinese tech stocks (particularly Chinese internet) might be signaling an important rise in speculative appetite which could fuel the next bull run.
Of the names Steve shared, the one that made the most sense to me was JD.com $JD. Check out this chart:
Whether it’s a pullback in a position or a pullback in my portfolio, drawdowns are the hardest thing to endure as a trader.
However, let’s not forget that I first had to have a winning trade on to suffer a pullback. That’s good!
If I want to have a big winner, it must first start as a small winner. Then the hard work begins…
To grow from a small winner into a big winner, it’s very rare for the path to be a straight line. There will be pauses. There will be the occasional shakeout of weak hands. There will be people on social media or TV talking about how extended the move has become and how there’s a high risk of a correction.
There will seem to be a million reasons to take profits before they escape my grasp.
In today's Flow Show, me and Steve Strazza took a look at some potential directional bets, but we both agreed that the right trade for today is one that would benefit from some sideways trading action.
With the broader markets looking a bit indecisive here, making a strong directional bet (in either direction) feels like a high-risk proposition. But there's a big cap name currently stuck in a range that is offering us nice options premiums to bet on further sideways action. We'll likely have to hold through an earnings event to earn our profit, but with a defined risk and a large margin for error, I like our chances.
In today’s Jam Session, I discussed the potential for markets to hit the pause button soon (if they haven’t already) and how that’s affecting my trade selection going forward.
Considering that some of our big winners have hit or are nearing our profit targets, or have been approaching expiration, it feels like a perfectly logical place for this pause to happen. $AMZN hit our upside price objective this afternoon!
And it might be earnings season that does it.
Earnings season is beginning again, and our first earnings casualty is already on the books with Fastenal $FAST getting taken to the woodshed this morning.
What the market taketh, I hope it will giveth back via an “add-on” trade we’ve got open in Wells Fargo $WFC. It is specifically betting on earnings being the catalyst to pop $WFC higher out of a high-and-tight flag.
The good thing about both the $FAST and $WFC trades is I have defined my risks beforehand. I don’t want my trades to become worthless following earnings, but if they do, the dollar loss to my portfolio will feel like any other small loss. No sweat.
We discuss this and more in this week’s short Options Jam Session:
When putting on positions with undefined risk (naked short puts, or short strangles, for example), one question I often get asked is: “How do you determine your position size?”
This is perhaps the most important question to ask when putting on these types of trades!
I have two imprecise, imperfect ways that I decide:
In today's Flow Show, me and Steve Strazza came out swinging with an opportunity to add to an already winning options trade.
Back in late January, we entered into a bullish longer-term bet in Wells Fargo $WFC. You can read about it here. That original position still has until January 2025 to play out (another nine months).
But take a look at this high & tight flag forming on the eve on their next earning release scheduled for this Friday morning:
It’s common practice to follow the major stock market indexes to get clues into what kind of market environment we’re in.
This is important because when considering trades to put on, I would be better served if my next idea aligned with the current market trend and volatility profile.
But sometimes, the market (as one defines it – could be “the S&P 500” or “the Dow” or “the Nasdaq”) isn’t giving me anything conclusive to make a firm decision against. I’m getting mixed signals. This is common.
One way I have found to get a better indication of the market environment is to simply use my own portfolio as a guide.
Steve Strazza brought up charts of the energy, materials, and commodities sectors on today's Flow Show. These are "peer indexes," meaning they often trend together.
And the current trends suggest we need to add more bullish positions in these areas.
The one name that stood out the most was Freeport McMoRan $FCX:
The stock market (as measured by the indexes) continues to trek higher, speculative fervor keeps building (as measured by what's happening in crypto), and these forces are combining to make it a dangerous environment to be caught short in.
And if you're short a name that already has a high short interest? Look out!
So naturally, today's trade is a play on punishing the stubborn shorts in a particular stock that look like they are on the verge of getting epically squeezed.
In today's Flow Show on Stock Market TV, me and Strazza get into why we love buying short-dated calls in Carvana $CVNA:
The majority of my current open positions are long-biased. If the market continues to rise, I expect many of these positions to keep working for me.
My few short-delta positions are on the verge of stopping me out for a loss. They were put on as portfolio hedges against all my long exposure. So in a way, I’m happy they haven’t worked out.
That’s the thing about hedges. I don’t really want them to work. Because that means the positions I really want to work likely just got whacked.
Ok, so my hedges aren’t making me money and my long positions are. What else can I do to lock in gains and minimize the potential for giving back a lot of open profits?
