Options Trading Newsletter - Issue #22
STOP!!! Doing what you are doing and Read This Newsletter NOW...If you are not getting results in Trading The Stock Market or Want to Generate Income from the Stock Market...This Newsletter is your MU
SORRY WE ARE CLOSED MONDAY...
Mondays used to be a dreaded day for me and many people because it is the start of the week and we are all back to work or for the kids to school. The week has ended (Weekend)......Mondays blue arrive... 😵
When we were in school, we used to give so many excuses to our parents..."mom, I think I have a fever....(after putting a hot towel on our forehead)...we get our mom to test the temperature....ya wor....you better don't go to school.... Yippee.....
Even as responsible adults, we come out with the slightest lame excuses not to make it to work or IMPORTANT MEETINGS....(you know what I mean). It doesn't matter what the excuse is, the best thing is if you can get the HEAD DOCTOR to certify that you are unfit to work.
If you are in any of these situations, we call this avoidance and there might be a reason you don't want/like to go to work/school. Maybe you are frustrated, maybe you are tired, maybe you just don't like it or you haven't finished your work/homework. 😆 I'm sure there is something bothering you.
Today, it is not so much of a problem to go to work or my kids to go to school because they just love it. Unfortunately, the pandemic is just keeping them homebound...nothing exciting to be in front of a PC the whole day. Imagine, the kids are being exposed to what we do everyday as an adult?? I am sure it will develop into something not so pleasant in the future...that they don't want to work in front of a PC when they grow up.
Personally, I look forward to Mondays, because the weekends can be so boring when the markets are closed. Although, I do not spend a lot of time on screen trading, the sound of the bell when the market opens or the ding when your pending trades get executed, makes me sound so happy. So the important thing, where I am getting is if you do something you love and like, you will always look forward to it, be it on a MONDAY or SUNDAY!!!
Stay safe....we will remain closed until we figure out our strategy...🤣😷
MARKET UPDATE
SPX
Volatility was high last week. It's was like sitting in the casino to play odds on BIG or SMALL. If you don't know this game, it is 3 dice game, each dice largest number is 6 and 3 x 6 = 18. If not mistaken, 1-9 points is SMALL and 10-18 points is BIG. So if you were trading SPX last week, you would have won both ways because sometimes it was BIG (Market UP) and sometimes SMALL (Market Down). Neutral, strategies like Iron Condors or Strangles would have been profitable. Unfortunately, I don't trade short term strategies lesser than 30 days on SPX.
Some people term it like you are collecting dimes on the railroad. Because in the real world people really drop a lot of dimes on the rail road and if you are brave enough, you can really collect a lot of dimes. But one unfortunate day, you will get head on with the train and die miserably. 💀
For the coming week, I would expect the same especially Friday is Non-Farm Payroll announcement and most of the week there's some FOMC member speaking. I seldom see these in trading options nowdays, but I do recall my forex trading days, where we monitor our entries and exits during these major speeches/events where the FX volatility is high. We used to scalp on these events and we either make hundreds or lose hundreds in less than 10 seconds. I'll leave forex to the younger traders as my weak heart can't take those anymore. 😓
NDX
Last week was brutal week for some big boys, with Friday Amazon (AMZN) being hit hard down by 7.5% just because market expected it to do better. It is tough that if you are good people expect you can be better. I guess AMZN had not used the strategies of Chinese Internet Giants used to continually beat the market's expectation, with some tricks down its sleeve.
Just when, I thought the China big boys are going to get out of their lows, they lost steam on Friday... It is difficult, if these stocks are neither here or there especially if you have some bullish trades on. I am just covering the theta decays with short calls and it is difficult to do it when it is going down and the problem is always when you get into a short call, the prices shoots up thereafter. Let's see how the China stocks unfolds next week, if my trades turned profitable, so far only JD.com while the rest is still slightly down.
Remember the "Metaverse" on FB? I guess last week people realised what it was and FB "Metaversed" back to reality... One thing I found out and learned the hard way in trading is that it takes a lot of patience and never chase a trade however nice it may sound. Because most of the times if the news starts to write as if the stock is going to shoot to the moon, it is the right time for you to exit and wait for the retracement to come. FB loss most of its 27 points gap up to close 20 points down from its all time high. I hope it retraces lower to 342 level, where I might do some trades at this level. In the meantime, I am still staying at the sidelines for this.
CSP PORTFOLIO PERFORMANCE (UP 11.3%)
(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)
The positions in the China stocks on HKSE was not going well last week. With the low liquidity on Tencent (0700), I could not roll to September expiry and was assigned earlier than expiry. Nevertheless, Tencent recovered significantly after the assignment, reducing the temporary unrealised losses on assignment. The volatility on China stocks would continue to be there until the China government is satisfied of showing off its prowess.
I will continue to monitor entry opportunities on retracements or when IV spikes. The restaurant sector seems bullish and if IV is high, there might be some good entry opportunities. I have already loaded with some Yum China when it went down together with China as a whole. It's not so nice if you have a surname China nowdays... people will just shy away and thinks KFC is owned by China....🍗🐔
I LOVE MY LIZZARDS...
We will continue on our lizzards this week. In exactly 1 month, the Sketchers (SKX) Jade Lizzard expired. I closed the Bear Call Spread with 0.05 as the price was close to short call and let the short put expire worthless. In total, I received $128 out of $133 premium. As opposed to a pure CSP, Jade Lizzard increases the premium basis by almost 30% with the same buying power, which means that you can generate 30% higher returns if the trade goes your way. of course, if it doesn't then you might earn 0% at worst. The odds are still pretty good as you can monitor the delta if it goes too close to the call spread to decide if you want to maintain or exit the trade with smaller profit.
In many trades, I would exit the call spread earlier then the put spread when there is a retracement to ensure that I lock in the extra premiums coming from the call spreads. Because at the put side, your position will be indifferent, if you treat it as a single naked put.
TRADERS TALK
Time passes so fast. I have done 6 Traders Talk since the show premiered on 15 June 2021. If you have not seen them, here's a link to see all past 7 shows, not to be missed because each one is special and have contents that will relate to you, I'm sure. 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.