Options are a leveraged instrument, and if you're not careful, it's easy to find yourself exposed to more risk than what you're comfortable with. A subscriber to All Star Options pinged me this week with some questions and I thought our discussion might be fruitful to everyone...
I'm having a great time here in Mumbai at the 7th annual Traders Carnival. I had the opportunity to sit down with Navneet SalujaDsouza from Bloomberg Quint to discuss my process and approach to markets.
I was confused too. But no, $DQ is not America's favorite destination for shakes, malts, and blizzards. But it is sexy in it's own way -- it's an energy company named Daqo New Energy in one of the hottest sectors we think will be leading stocks higher this year -- Solar Energy. According to wikipedia, $DQ is a Chinese company "engaged in the manufacture of monocrystalline silicon, polysilicon, and silicon wafers, primarily for use in solar photovoltaic systems." OK, sounds cool? It really doesn't matter to us, we're just following price, and we're going to trade it with options in a defined risk spread.
Everyone always wants to talk about how high the stock they just bought is going, or how much money they're going to make on a new position. "JC I think Apple goes to a Trillion Dollar Market Cap!" or "JC Bitcoin is going to $100,000!". These are things I hear frequently, or at least some sort of variation of these comments.
This is perfectly normal behavior. We should not be afraid of it. But more importantly, I think we need to be aware of the implications of these feelings. The thing is, once we are already in a position, our emotions get involved. When our stress levels rise, we act emotionally, rather than logically. This is how we're hard-wired. It would be abnormal for us not to think this way. But again, the important thing is to be conscious of it and not let it dictate our actions.
It might sound like we're beating a dead horse here, but the Russell 2000 printed another new all-time high yesterday (I know, it ended up being a red day, but that volume tho...) and there's just no way I can view this with any bearish context. Sure, perhaps it's extended and due for a rest (or gasp, a pullback) but it's simply irresponsible to be spouting actively bearish broader market calls in this environment right now.
As such, the team at All Star Charts keeps digging into the sectors that are looking like candidates to lead the next leg of stock market gains higher. Today, we've got our eye on the Biotech sector.
The team here at All Star Charts is very bullish on the Oil & Gas Exploration & Production sector as discussed here (premium). Before we get into how we're going to play it, here's a little background to give color for our optimism for the opportunity we see, from our kid off the bench Tom Bruni:
This is such a treat for me. I get to go to India to talk about Technical Analysis with hundreds of really smart and eager to learn investors from all over the country. The biggest investor conference of the year starts on May 24th and I will be the first presentation of the event. The 7th annual Traders Carnival will be Asia's largest 3 day residential conference and I could not be more excited to participate.
I was lucky enough to visit India for the first time this January. I was blown away by the experience. We had about 200 people at an event at Bloomberg in Mumbai where I was the keynote speaker. The enthusiasm for Technical Analysis was amazing. I've never seen anything like it.
One of the great things I've experienced while getting All Star Options off the ground with JC has been putting pen to paper to really codify for myself how I view options trading. It's one thing to have a nebulous sort of idea of how I approach certain options strategies and when and how I might employ them, but it's quite another to sit down and really break down how each strategy should work, how it fails, my plans for taking profits and/or cutting losses and opportunities for position adjustments.
Instead of hoarding all this brainstorming for myself, we've decided to add it to the Education section of Allstarcharts.com so that you, too, can have easy reference points for thinking through your own trades.
In JC's All Star Charts May Monthly Conference call for subscribers, there was a theme that he consistently revisited: Bonds are going lower.
There's no need to over-complicate this stuff. We could waste time arguing about what increasing interest rates means for the stock market, or yield's implications on policy decisions in Washington, the effect to be felt in the housing market, or how retirees savings may or may not be effected. That might fill airtime on SHOUT!TV, but all we care about here is positioning ourselves to make money. Leave the intellectual debates to the talkers.
We're the doers, and we want to position ourselves for further downside in bonds.
Earlier this week, JC pointed out that the software sector broke out to new all-time highs. I don't mean to keep harping on this, as you've no doubt read JC making this point over and over, but this sector making highs is simply not something we are likely to see if the overall market is pointing to a bear market.
The third largest component in the software index is Service Now, ticker $NOW. And we see an interesting opportunity developing.
Every month I host a conference call for All Star Charts Premium Members where we discuss ongoing themes throughout the global marketplace as well as changes in trends where new positions would be most appropriate. This includes U.S. Stocks & Sectors, International Stock Indexes, Commodities, Currencies and Interest Rate Markets.
The new volatility regime in 2018 has caused many to question the uptrend in stocks that we've seen the past couple of years. In this call we will go over all of the markets around the world including intermarket relationships that help us identify whether risk appetite overwhelms any risk aversion we're seeing from institutional investors. On Tuesday, we'll focus on the strongest sectors and strongest stocks that we believe will be leaders during the next leg higher throughout the rest of 2018.
This month's Conference Call will be held on Tuesday May 15th at 7PM ET. Here are the Registration Details:
In a recent report to Allstarcharts Premium subscribers, J.C. laid out a case why he's bullish on the Industrials sector and why that's important to the overall market. Not ever one to mince words: "we want to be buying right here right now and very aggressively. The bet is that Industrials are now heading higher and leading the market to new all-time highs." That sounds pretty convincing to me!
