IDENTITY CRISIS!!!
Recently there was a lot of hoohah...on picking of brand names. The first one happened in Malaysia where a local whiskey distiller named their award winning whiskey brew "Timah". If you are not from Malaysia, you probably don't know what this word "Timah" means. "Timah" in English is mineral "Tin". Well to me there are things like "Gold" brew so naming a whiskey as "Tin" brew can also make sense.
There were many criticism that came on the name that that resembles the name of lady "Fatimah" and it resembles man drinking a lady which is not an acceptable thing in our culture. And then goes many other things that came after that that depicted the picture on the bottle resembles a religious man on a whiskey bottle.
At the end, the company was required to rebrand their product which will basically cost a lot of money and also more work for a growing organisation.
On the other side of the world another new name appeared in the market. This was on Facebook which changed their company name to "META". Well it is not the 80s Metallica Rock Bank but plain META... short form of Metaverse...which I think is not even an official word contained in the Oxford Dictionary or any official dictionary in fact...whatever is mentioned nowdays are probably made up just based on what Facebook or social media explain for its meaning.
As this was a foreign company, the same bunch of people who had a lot of hoohah on "Timah" did not made any remarks on this. If it was a local company who had started to make this change, there may be a lot of comments that META resembles this and that and not appropriate...
In reality, this is just how the world works. If given opportunity, there will be a kind of people who can criticize anything and anybody. There will be people who will want to pull you down and derail the things and efforts you put in to work on something that will help you achieve your goals or dreams.
To them, whether you succeed or fail is irrelevant but they are out there just to proof or show that their comments are valid at least only to them. If we fall into their trap and get affected on what they say, then our efforts would have been futile and these negative people would have succeeded in their game of derailing you.
So it is important that if you believe in what you do, continue with it regardless of the obstacle or criticism faced. If you persevere, you will definitely achieve success.
MARKET UPDATE
SPX
SPX grinded higher again continuously for more than 2 weeks to reach all time high of 4608.
In a world where the real thing are becoming more difficult for many people and businesses, the stock market is going into their all time high. Well one thing that we have to acknowledge is that the stock market behaves in a strange way and may not necessary be logical. One school of thought is that the stock market precedes the economy at least by six months. ie. if we expect that six months down the line the economies of the world will become better and pass this pandemic phase, then the stock market will price this in already six months ahead.
So if you are the one who always waited to get into the market when things are better, then you will be in for a surprise because when things are better, all the stock prices have already gone up higher and you will be late to the game. You will buy at the highest toppish prices for the stocks and will be left with little upside.
The other thing that you will notice is that the market nowdays is also filled with the mentality of buy on dips. Especially if we are moving to earnings period we see a lot of stocks which grinded to its high and suddenly tanked when earnings are announced, even if the earnings have beaten estimates. The market makers will take any lame excuse to tank it down whether it is because of a small reason that future earnings will be challenged because of logistic and supply chain problems or even on shortage of materials etc.
So as traders, we have to see what kind of opportunities exist for us during this kind of environment. And if you trade options, "Votality" is going to be your friend so make best use of it by deploying the right strategy at the right time!
NDX
The rate of increase of NDX even surpassed S&P 500. In one month, NDX has gone up by 10% as compared to SPX of only around 7%. As fast as it can go down it can also rebounce twice as fast...
The market is just filled with positivity that all prices that comes down are bound to go up...whether this is an over optimism or just how the market works nowdays shall be seen in time. Example, was on AMZN where it reported lower than estimated earnings last Friday and the stocked opened gapping down 146 points and closed the day only down 74 points recovering half of it at the end of the day. The market is just taking opportunity to add on to its positions. The same for AAPL which also tanked around 5+ and ended up down 2.77 with a very bullish pinbar. Even if AAPL's revenue was lower and expected to continue having production problems due to shortages of chips.
Having said, that, market is also a bit selective on which type of stocks which it gives such kind of confidence. Stocks like SNAP tanked over 27% on earnings continue to slide to over 30%. IBM tanked 10% and continue to slide to 12% down. INTC tanked 12% and slowly recovering. Well, personally, I would think even these stocks are only down temporary and when the rest of the popular ones are at all time high, the market will come back to these hard hit stocks and move them up again. Let's give it 3 months and come back to these stock prices.
China tech stocks continue to slide hitting resistance for the past week. And when most of it is hitting back to the 50EMA, we will see if there will be a rebounce in the coming week.
CSP PORTFOLIO PERFORMANCE (UP 19.3%YTD)
(Portfolio performance is on MYstylework's Portfolio and is not a recommendation to buy and for informational purposes only. You are adviced to seek your own professional adviser's views and perform own due diligence when evaluating any stock, options or investment trades)
This week we see a bit of volatility again as the positions related to the China stocks again came down. This would be a mixed of assigned China stocks and also existing CSP positions like in KWEB.
As premiums are still good, we have rolled all the ITM positions on KWEB and also EWZ to buy more time for recovery. In the coming week, we will again see if there are opportunity to top short term positions if the China tech sector rebounces.
TRADING EARNINGS...
With earnings season almost half way in, there have been many surprises this round. AMZN missed earnings quite badly but market did not penalise it as much as the miss. It only moved half of the expected standard deviation for the same week expiry of 29 October.
AAPL was more or less on target, only marginally below and the price initially went down 1 standard deviation but at the end closed only around half standard deviation move for the same week options expiry.
FB was more or less on target, marginally above and market punished it down losing 13 points after earnings. Slightly above half standard deviation expected move.
NFLX earnings did way above estimates and it went down 13 point, one third of the expected move on earnings week. The following day, it rallied back 25 points up.
GOOGL beat earnings and popped 136 points up post earnings. Almost 1.25 expected move up.
What does this tells, us? Trying to guess if better earnings will result in the price to pop up and bad earnings will result in the price to crash down is going to be futile. It's only going to be a 50-50% chance that you will make the guess right. And if you had bought calls or puts as an earnings play, you would probably ended up being at the wrong side of the coin.
There are also another impact here, which is IV would be high pre-earnings resulting in calls and puts being expensive pre-earnings. And post earnings, even if we had the direction correct but if the price does not move much, the IV crush would have resulted in the options prices becoming lower when we exit the trade.
So rather than guessing direction, we would be better off to bet on things which are more certain and works to our advantage. The first thing is we know the expected move which gives a 68.2% probability of it hitting +/- the expected move. The second thing is we know that post earnings, IV will rise pre earnings and fall poste earnings result in more expensive options pre earnings and cheaper options post earnings.
So if we use this 2 factors, we can set-up non-directional trades using this 2 known factor to our advantage. Sell Options at 1 to 1.5 standard deviations and hope that the actual price movement is still within the expected move and if we buffer ourselves up by another +0.5 standard deviation, we will be even safer. And on the IV crush, even if the prices don't move which is to our advantage, we will profit from the trade just because options prices will reduce when IV reduces post earnings. If the trade goes against us, we can either just sulk it up for a loss or roll forward the trade to the next monthly expiry if we are doing the same week expiry earnings play.
One neutral strategy we can use for these type of earnings play is Iron Condor, a trade comprising 4 legs, at one side a Bear Call Spread and on the other side a Bull Put Spread. These Iron Condor will be suitable for stocks which is priced above 100 and even easier to structure for those more expensive one. Just enter a quickie, one day trade to get whatever comes out as profits the next day.
FREE iPhone 13 Challenge
After 4 weeks, we did 3 trades and all 3 we exited with a profit ranging at 45% to 88% profit target.
Well you can surely say that our iPhone 13 upgrade is closer than expected as we still have 2 months to trade AAPL. Having earnings behind us now, we are just waiting to see the price action in the next days to deploy our next Options Strategy.
For those who have not registered for the iPhone 13 Challenge, the registration link is here [Register Here]. We will share the trade entries when we do a trade and also explain in detail the executed strategy in a video at the Challenge Members Area.
TRADERS TALK
Did you hear last week's Traders Talk?
I was speaking on why you should not invest in property but instead learn how to buy property. Is there a difference, yes for sure!!! Listen to Traders Talk Series 20 if you have not done so. View Past Traders Talk
I have even got the highlights here for a sneak peak...Sneak Peak Traders Talk
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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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