I F*d up.

And when I do, I usually suffer the consequences – almost without exception.

But today is one of those exceptions. Thankfully.

Recently, in an effort to fade the rising volatility in the options market arising from the 3-4 week pullback from recent stock market highs, I sold naked puts in a large cap stock – Occidental Petroleum $OXY.

I like the name for a number of reasons, the most prominent being that Warren Buffett (Berkshire Hathaway) has been acquiring large blocks of stock just below current levels. This is support.

So when the broader markets were continuing their slide a couple of weeks ago, I felt $OXY was a high probability bet to hold these levels until the mini-market panic cooled off, and selling premium via $OXY puts seemed like an intelligent way to play it.

So far so good.

Stocks continue to be slippery with the S&P 500 down 6 out of the last 8 trading days.

I'm in the camp that this is a constructive pullback after a fantastic run to kick off 2023. JC has been pounding the table all month about how sloppy, digestive trading action in the month of February is perfectly normal market behaviour.

With February drawing to a close soon, I wouldn't be suprised to see this downdraft exhaust itself soon. As such, I'm going to make a tactical bet that a leading name in the banking/finance sector is going to hold these levels and potentially lead the way back to 2023 highs.

It sounds so simple.

To win at trading means to take profits.

If there are no profits taken, there is no winning. And if there is no winning, then what am I even doing here?

Subscribers to the various options education services we provide at All Star Charts know that I’m usually very clear about where I’ll take profits in the various trades I put on. Most trades have a profit target and I set the GTC limit orders out in the market and let them get hit. I’m hands-off. Unemotional.

So it would seem that I’m pretty automatic about this practice of profit-taking in all realms of the market in which I engage.

You might be surprised that this hasn’t been true in my personal index options trading.

Slippery markets make for rising options premiums. And one sector ETF is currently rising head and shoulders above the rest, offering some juicy premiums for us to sell into along with a wide risk management band for us to dance in.

So let's take advantage of the rising fear in this sector for an opportunistic trade and potentially quick profits.

When I last wrote to you, I was mired in a spiral of frustration as I grappled with understanding what went wrong with one of my strategies, what I missed that opened the door to a larger-than-expected loss, and how to move forward.

I’m happy to report that I’ve come out the other side.

The only way out is through.

That’s always been true for me, at least.

My wife can attest: up until yesterday, for a week I’d been walking around like a grumpy zombie, lost in repetitive thought, running mind simulations of hundreds of scenarios and if/then situations. 99% of the ideas were just simple regurgitations of things I tried and failed at in the past. It takes tremendous effort for me to remind myself: been there, done that.

I often waste significant time and energy rehashing old tricks I’ve employed in the past that I’d already proven don’t work as intended. Being better about journaling and reviewing said journal regularly would probably help me out with this.

What helped turn the corner for me was

This one's a bit of a short-term tactical bet.

We're fading a recent move and we'll know if we're wrong quickly.

But the nice thing is that we know Uncle Warren Buffet has our back.

Timing matters for this play, so let's get right to it.

As a trader, I’ve grown comfortable with losing.

Losing money is part of winning over the long run.

There is no winning without losing. Sounds crazy, but traders know this to be true.

We’ve all heard that losses are lessons. They are expensive lessons, but often the most valuable. Nothing valuable comes cheaply.

During the triage phase of dissecting what went wrong, we often have “a-ha!” moments that lead to new rules and new promises, and renewed confidence. “Next time,” we tell ourselves, “the outcome will be drastically different!”

This is all well and good.

Today, I currently find myself in a unique spot.

In the options market, summer flights priced in Boeing options are pretty cheap right now.

I think I'll be looking to take a flight to a fun European destination if I can get a bullish position in Boeing to pay for it. Maybe I'll even fly on a Boeing jet?

During our analyst meeting this morning, we kicked around a few bullish ideas, but it was this Boeing $BA chart that rose to the top:

We're going to get involved with a bullish options spread that gives us through the summer to most efficiently express this thesis.

JC had a great post this weekend about our favorite Magazine Cover Indicator violator -- The Economist. Go give it a read and then come on back here.

Are you caught up? Good.

You read what JC said to do. Let's do it.

Strazza and I did The Flow show earlier this week in which one trade that stood out and caught my interest was a juicy short squeeze candidate.

Checking back on it today, the stock still maintains a short position greater than 20%. That means more than one-fifth of all shares outstanding are held by people with a short position. And if this stock starts busting higher, the only way traders holding a short position can end the pain is to buy the stock.

This can potentially fuel a rapid rise in share prices (see: Gamestop $GME circa early 2020).

I'm certainly not calling for a repeat of past meme stocks short squeezes here, but in this case, we've got a stock that's chart is in the middle of completing a beautiful base and short holders are no doubt keeping their fingers near the trigger to exit this position quickly if we see some follow thru to the upside.

That creates opportunities for us.