TRADING 101
Well, 101 seems to be a nice number and covers almost any 101 topics, us being Trading 101 because this is a “Trading” Newsletter. Anyone who does not have any knowledge about a subject will start to get the 101 guide obviously.
There are countless of 101 guides out there but most of them would only cover the basics and give you a general understanding of the matter. Not that it is useless but as said it is “basic”. To advance further into any topics be in trading or cooking, the thing required is to surpass what is beyond the 101s. Which takes us to what we do with the starter knowledge we have obtained. By just knowing and not using it, it just take-up data space in your brains although I am told that the capacity is almost limitless. Talking about data space, my laptop is running out of space as I had done such massive collection of videos, slides, write-ups and graphics starting up these newsletters, training and education workshops and my live shows. Sorry, sidetracked😅…
101 is always a start and to get good at anything first it takes interest and that will carry you through to becoming an expert. Because with interest, you start to explore and then practice and eventually become good at it. Let me tell you something, interest is different from a “goal”. You can have a “goal” but if you do not have interest in something which will take you to the “goal” then it will be tough. Because everything you do is going to become a “task”, nobody likes work 😝
So the next time you start on any 101s, learn something which is of interest to you and see how far you can go…. mine took me far enough but I believe I can go even further…😉
“Love what you do and never work a single day of your live again”
SPX (4079)
Another choppy week, which created more uncertainty if the markets would want to go up or down. I am not sure about you, but I see that the momentum which had helped SPX breakout above the 1 year resistance trendline (in green) has already lose steam. Going down to smaller timeframe, eg 1 hour you see that the trend is on a descending down channel. Support hovers around 4050 and it’s the second week we closed below 4100 which means if we don’t break above this level, we might likely go lower.
The last buy on the dip last Friday, does not seem to be working so much as people starts to doubt that we will continue to have a strong rally with all the recent economic data which came out having skewed to inflation still being sticky and high.
CPI came out 6.4% against expected 6.2% [reduction not as high]
Retail Sales 3.0% vs 1.9% [people still can spend ~ wages still fine]
Unemployment 3.7% vs 3.5% [worsening businesses]
PPI, 0.7% vs 0.4% [input cost going up]
Next week, GDP and unemployment claims will come out on Thursday and if the data is bearish, lets see if the market can hold with these dip buyers losing ammunition in the last few dips. We already sold out of our positions in MSFT at $273 after the ChatGPT runup and even AAPL, we sold off at $154 taking its capital to sell some puts to get some better premiums and discounts as prices comes down. Even if we need to take back these stocks, we would have made the differences selling out on higher prices plus the premiums earned. We are making best use of these volatilities rather than staying put doing nothing holding purely long term stocks. However, if the market runs up, you will miss it though, that’s the downside.
Earnings is almost coming to an end with some interesting earnings to watch next week, WMT, COIN, NVDA & BABA.
The trading range for the week is between 4000 and 4150.
NDX (12358)
Finally NDX sold off in the last 2 days of the February expiry. Sometimes, the stock market likes to play with your mind and however experienced you are they can really test you. We had been holding some bear call spreads on NFLX and AMZN which was ITM for some weeks and we were rolling them to buy more time to get out of the positions. These were all max loss positions but as prices retraced after the last rally we expected that we could buy some time to exit. On Thursday, when prices came back close to the short call strikes, we exited with a small loss. But on Friday, it came down further and the positions went into profits 🤬. Not really a rant but this is part of the game and I could not really complain as I got out of losing like $2000+ to a loss of less than $400. The risk to holding the position one more day to see the results against saving $1600 of my capital was the right choice. Capital preservation is important as we can always comeback for another fight if we still have bullets. That’s the lesson for the day…😅
NDX moved within a range of 330 points (2.6%) for the week and closed slightly higher for the week. It seems that for the past 2 weeks, it has been in rangebound between 12200 to 12700. Recall in November to December we were also in such kind of consolidation before we had a selldown. That consolidation came from the October rally. So we will also monitor the low points of 12200 and if it breaks, we are likely going down a bit before a wave up again, like what happened in January. So far the economic data which came out after the last Fed Rate hike is not at all helping the Fed to ease on their interest rates policy. That’s also the reason we started to trim some positions on this rally up to lock in some profits. In the past, I never did such kind of trade management for long term positions but looking at the roller coaster market, why not? If you make less, its ok but better than to see profits being wiped off many multiple rounds. Buy and hold still works but I have a bit more of the naughty trader instinct in me than just being a passive investor 😅.
Today market is closed. The trading range for the week is between 12000 and 12500.
TRADING OPTIONS ON HANG SENG INDEX (HSI) AND HANG SENG TECH INDEX (HSTECH)
It has been some red days for the week for Hang Seng. Still failing to break the swing down. The support we see is still around the 20,000 levels and and as of today, it needs to hold above the last week’s lows of around 20700. It went down below that on opening but seems still holding above 20,600. Let’s monitor this for a while. As I have positions expiring around this level, again the test of the markets on my sanity 😅, I will not enter any new positions. But at current levels, it would be good to take-up positions below 20,000 levels as that will form a physiological support for HSI. The area of last consolidation was between 19000 to 20000.
TRADE MANAGEMENT (EXTENDING DURATION + INCREASING WIDTH)
We covered before how to do trade management for credit spreads by extending duration. The target is to extend duration with a credit. It is not always the case that we can extend with a credit especially if you have past beyond the 21 days to expiry period and if your trade is ITM.
If your trade is ITM and close to expiry, most likely the trade would almost reach a full loss especially if it is deep ITM. In such case, you will probably not be possible to extend duration without paying a debit.
In instances, where stock price becomes overextended and bound for a retracement, you are now stuck in a dilemma if you would want to pay a little debit to roll the trade to buy the time for retracement or just take the full loss on the trade?
Another adjustment alternative is to widen the spread of the credit spread when you roll. The effects are:-
You buy more time
Possible to roll without paying or even with a small credit
Risk of Trade becomes bigger as Max Loss will increase by the additional width added less credit received. Eg. Initial Width was $5 and you increase the width to $6, so the additional risk taken is +$1 less by the credit received or plus debit paid.
On a risk point of view, you may add less than $1 to get a gain of $4 [or reduction of loss of $4] [Assuming the max loss of the initial spread was $4]. If you take think of this as a new trade, risking $1 for $4 gain is a good trade! And the time to get this is normally quick as you were waiting for the retracement of a highly oversold stock to get your initial trade OTM.
I hope you get the idea of what we did above, as Trade Management is one crucial skill that will come in handy when trading, especially if you are a premium seller, it’s always possible to turn losers into winner if you know how to…😉 Also open up your mind as rolling is merely closing the old trade and opening up a new one…
TRADE DIGEST - XBI WINNER +$330!!!
On and off, we do make some Trade Digest during our Traders Talk show. When we see a trade opportunity, we would cover it as a learning point for our viewers out there. The Trade Digest we did on XBI came out a 100% winner as the Iron Condor we did expired worthless. Although, we did a slight variation to our trade with additional 2 Bull Put Spreads, which protected the trade as price of XBI kept going up and the Bear Call Spread portion of the Iron Condor was taking losses during most of the trade duration and only came down closer to the weeks before the trade expiry.
We took the trade on 27 December 2022 and left the trade expire worthless on 17 February 2023. Those who wants to see the trade summary can go to our Tik Tok video below and those who want to see a deeper rationale on why extra 2 Bull Put Spread can see the Traders Talk Video.
TRADERS TALK
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We covered how to trade VIX with high probability last week.
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TIKTOK VIDEOS
Trading Options Using Jade Lizzard strategy. Get free petrol subsidies trading XOM 😏 #optionstrading #investing101 #stockmarket #xom
Banks don't want you to know this secret. Revealed in one of our earlier Traders Talk in June 2021. #banksecrets #investing101 🌈✨🏝️
Generate Property like cash flows from the stock market with only one fifth the capital. #Hello2023 #propertyinvesting #rentalincome #investing #stockmarket
Investing 101. It is difficult to catch the bottom and catch the best prices but we can tranch in our buy points so we can get the best overall long term returns without missing the boat. #hello2023 #investing #apple
Trade Digest on XBI - Trading Range using Iron Condor options strategy live from Traders Talk 27 Dec 22. #optionstrading #tastyworks
Long Trade on JD. Trade setup from Traders Talk 6 Dec 22 #optionstrading #tastyworks — www.tiktok.com TikTok video from Mystylework (@mystylework.trade): "Long Trade on JD. Trade setup from Traders Talk 6 Dec 22 #optionstrading #tastyworks". JD Long Trade | 6 Dec 22 Traders Talk | Like & Share ♥️. Lazy chill out, romance overseas celebrity, 10 minutes(1019319).
Trade Digest On XLE using Iron Condor #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Trade Digest On XLE using Iron Condor #optionstrading #optionsstrategies". Iron Condor on XLE | Trading in Range Use A Neutral strategy | Iron Condor | .... Lazy chill out, romance overseas celebrity, 10 minutes(1019319).
5 ways to reduce cost of calls. The ultimate traders' guide. #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "5 ways to reduce cost of calls. The ultimate traders' guide. #optionstrading #optionsstrategies". 5 Ways To Reduce Cost Of Calls | options trading | traders | .... Lazy chill out, romance overseas celebrity, 10 minutes(1019319).
Trading options with 68.2% probability using Expected Move 😎 #optionstrading #trading101 — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Trading options with 68.2% probability using Expected Move 😎 #optionstrading #trading101". Expected Move | How to trade options | trading options | .... Corporate Uplifting Inspirational Motivational Pop Rock Piano Violins Theme Song.
mystylework.trade (@mystylework.trade) on TikTok — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade). Butterfly Trade | How to setup low cost high returns options trade | Learn to trade options | .... Lazy chill out, romance overseas celebrity, 10 minutes(1019319).
Winning Options Strategies everyday. Creating high probability low risk trades 😎 #optionstrading #optionsstrategies #elonmusk @tastytrade — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Winning Options Strategies everyday. Creating high probability low risk trades 😎 #optionstrading #optionsstrategies #elonmusk @tastytrade". Elon Musk | Stock trading | Another WIN 😎 | .... Sunrise.
Twitter shareholder's meeting for takeover by Elon Musk 13 Sep 22, 10am. Lets trade... #optionstrading #optionsstrategies @tastytrade — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Twitter shareholder's meeting for takeover by Elon Musk 13 Sep 22, 10am. Lets trade... #optionstrading #optionsstrategies @tastytrade". select Nov 18 expiry | Sell ATM call strike 43 | recheck ATM price on open on Monday | .... TikTok's song-like tropical house(974524).
J.Powell's Message yesterday in 1 minute... @tastytrade #optionstrading #optionstrading #stockmarket — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "J.Powell's Message yesterday in 1 minute... @tastytrade #optionstrading #optionstrading #stockmarket". Fed Message??? 🏦 | Responsibility For Price Stability.... | Inflation Target | .... Suns.
What to expect for this week's market.. #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "What to expect for this week's market.. #optionstrading #optionsstrategies". SPX down 141 points (3.37%) last Friday after J.Powell speech | Monday another 27 points drop | but we see some slight support at 4000 level above daily 50 MA | .... Change My Mind.
Option Trade on JD - watchlist at last Traders Talk on 9 Aug. Closed today $922 profit 🤑 #optiontrading #tradingstrategy — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Option Trade on JD - watchlist at last Traders Talk on 9 Aug. Closed today $922 profit 🤑 #optiontrading #tradingstrategy". Option Trade JD covered potential trade during 9 Aug Traders Talk Entry 9 Aug Exit 26 Aug Profit $922 | watch till end to see the trade we did 😉 | Option Trades Adjustments - Based on Price Actions | .... YOU'RE MY SUNSHINE.
Hawkish remarks by J Powell crushed the market - pullback expected until Next FOMC in Sept 21. Watch for key points raised #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Hawkish remarks by J Powell crushed the market - pullback expected until Next FOMC in Sept 21. Watch for key points raised #optionstrading #optionsstrategies". Key Points For Traders | Here's what JP said.. | > rates will go up until inflation is down to 2% | .... Flip through.
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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.
IC worked well on the ETFs past many months. dont pick the volatile ones in tech or communications. xle and xbi has worked well. just need to take care of the low IVs but recently it is starting to come up again. ☺️ i will recycle the trades soon
Congratulations on the huge iron condor winner! If markets continue to chop, I think that strategy will play out nicely.