Options Trading Newsletter - Issue #133

Renewable Energy... [Option Today - No Trade is a Good Trade]

Renewable Energy… [Options Today - NO TRADE IS A GOOD TRADE ]

Over the past several years, renewable energy has been a topic of much discussion. Although there hasn't been widespread adoption due to initially high costs, countries that actively promote renewable energy see faster and more significant adoption rates. It's crucial to understand that Electric Vehicles (EVs) are not a form of renewable energy themselves. Renewable energy is actually those derived from natural sources that naturally replenish or regenerate without human intervention, such as sunlight, wind, rain, waves, and geothermal heat.

Last weekend, my household began harnessing renewable energy from the sun through solar photovoltaic (PV) technology by installing solar panels on our rooftop. The initial investment is substantial, equivalent to approximately five years of energy consumption costs. However, after this period, we anticipate enjoying cost-free energy, assuming traditional electricity prices don't drop significantly (which is unlikely). Furthermore, the cost of adopting solar energy is expected to decrease at least by 50% or more in the coming years as more people adopt this technology, and supply becomes more abundant. The primary supplier of PV panels worldwide is China, so it is also playing its part to make the world cleaner.

Investing in solar panels should be a wise decision, especially for countries with abundant sunshine throughout the year. While countries with less sunshine might experience shorter runtimes for their solar panels, the alternative energy sources aren't economically or environmentally superior. Dependence on oil, gas, or coal is not sustainable or environmentally friendly due to the associated emissions and environmental pollution. These pollution levels pose significant concerns for our future and the well-being of subsequent generations. Consider watching the film Black Knight; it shows how polluted the world can be and how human will have to endure pollutants in the future.

Having initiated my commitment to renewable energy, I encourage others to consider adopting similar renewable energy generation methods. Together, let’s contribute to making the world a better place. After all, what's the point of amassing wealth if we cannot enjoy the fundamental pleasures of life, like breathing fresh air?

SPX (4228)

SYX did not hold support at the previous level at 4320 and sold off for the week a bit especially towards Friday, probably on risk aversion of the potential US Government shutdown AGAIN…. and we say again as these kind of discussion comes on for so many freaking time to agree on spendings and budgets. When you spend more than you can afford that’s the problem and it’s always going to be solved at the end of the day as they can’t afford another shutdown right? Which eventually it did…

Monday, ES futures opened up +20 points. There are some economic data coming in this week, Manufacturing PMI on Monday and towards Friday the Non-Farm Payrolls. ADP Non-Farm comes in Wednesday.

We are looking if SPX will hold 4260 level for now. We are down 2 months almost 7% from end July highs. However, as long as the Fed still gives out indication of further hikes, it is unsettling for the markets.

DXY has broken above 105.88 and a strong USD does not go well with the stock market. We saw on Thursday it coming down below but went back up again on Friday. If it comes back down below this level, that could ease a bit on the stock market giving it a bit of breather on the 2 months weakness.

The 10 year treasury yields (TNX) has also been to its highest last 2 weeks, topping to 4.575, which obviously obliterated bonds. TLT went down to its lowest to 87.10 last week. Of course many people are caught long on TLT including we which was all screwed by the Feds decision to prolong the rate hike. But we are already at the lowest and its not all bad that we can generate some great premiums while waiting for it to bounce back up. Possibly thinking to add on more positions if it hits the months low of 82. But I don’t think it will go there as yields are already topping. But you will never know if the Fed raise another round of rate and keep 2024 open for more hikes, that level will be breached easily…

GLD is another counter which was smashed last week. Moving down a week by $7.17 more than 3 standard deviation weekly move is way too much and painful for our trades. Next level of support is 168 or the 200 day weekly MA. As the move is overextended, we may possibly see a rebound if, TNX comes down this week or at least don’t go up further. 175 would be the next resistance level up. We rolled in time all our shot put positions buying more time for a recovery.

Crude Oil futures has been finding it hard to move up more now. At above 90 levels now, it looks constipated failing to stay on long above previous highs of 93.74. As said earlier, we see more downside than the market chatter that it will go up above 100. We may be wrong but high oil prices is not good for the economies and as you know, it’s always easy to switch if you want oil to go up or go down, just adjust supply… so few people can control it easily anytime!!!

I think we covered a lot this week, and hopefully you get a flavour on what’s happening around. Regardless what happened in the past week, our “Options Today - Neutral Trade on SPY” neutral Iron Condor and Strangle is up 10%…

Trading range for the week is 4200 and 4350.

NDX (14715)

Nasdaq 100

NDX remained relatively unchanged for the week. So this would work well for all those neutral trades out there. However, this week we could see the market to be more directional this week as there are many NDX stocks which comes in as buy the dip targets.

Trading range for the week is between 14200 to 14950.

MSFT

MSFT came back to 310 levels which was our short put position for the October monthly expiry. It closed above the previous low, which makes it a target for many bulls.

AAPL

AAPL did not fair well for the past weeks. After topping 190, it was all the way down by around 10% now. It also did not close above previous low last week. As it can go both way, we are just selling calls to generate more premiums in case it goes down more or sideways this week. It should have a bit of resistance between 175-180 levels, so anything in between this short term should be fine.

NVDA

NVDA has been holding well at the 21 daily EMA.

HANG SENG INDEX (17809)

HSI sold off again losing back all the gains it made last week. But towards Friday, it bounced back up. It’s a volatile up and down for HSI which is not too bad if we are doing day trades. As we said lastime, HSI behavior's sometimes predictable with large swing up or down which are short lived.

Our long position was stopped out but we went back in as we felt the selloff was overdone and could rebounce, which it did on Friday and we took profits off its high. At the same time, we protected our positions a bit during the selloff by going short at the same time and also took profits off it. Win both way trades are always the best… We only takes such trades if we have a certain view of the levels of the market because you could also lose both ways if you are not careful.

HSI is closed today but last week, the futures market closed at 17753. We have short positions from 17900 and Tuesday open depends on what develops in the US markets today. Further, due to China labour day holidays, trading may be thin for the Hang Seng market making it still great for our current positions. We keep a tight stop for the trade, so to balance our risk and reward.

HSI is on a downtrend for most part of the year and now that we are coming to the last quarter, it could continue to go down all the way. But the best thing is that the worst market tend to become the best markets when cycle reverses. Just like how the covid affected the China markets it flipped 50% when it reversed although short lived.

Next support is at 16833 and there’s plenty of opportunity for big swing ups and down reversal plays.

OPTIONS TODAY [NO TRADE IS A GOOD TRADE]

I was trying to find some reasonable trade for this week’s Options Today and frankly I could not find any. These are Option trades going into 30-45 days and those which are less risky and a high win rate and best are those which could profit whichever market direction goes.

Over my years of trading, one thing I have learnt is don’t force yourself into a trade. If you can’t find one, just hang lose and wait till an opportunity comes. Forcing yourself in a trade results in bad decisions and at the end most likely financial loss and stress.

One good trade can make-up for 10 mediocre trade and you would also spend less time managing it. So if you can’t find it, just wait for a better time to come.

So hang lose this week….the start of the last quarter of 2023 could be the best one!

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DISCLOSURES

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf

MYstyework is an Online Financial Literacy Educator and materials provided is solely by MYstylework and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. MYstylework, through its contents, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. MYstylework is not in the business of transacting securities trades or an investment adviser.

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