Outgrowing Us…
What were you doing at age 12 back in the days?
I recall vividly I was still running around the neighbourhood, climbing trees, playing football and doing everything kids do then and a lot of them was physical stuff, videogame was scarce, PacMan and GameBoy-Popeye as I recall. Things have become very different nowdays, the kids stick mostly at homes, glued to their seats, whether watching Netflix/Youtube, playing video games or on social media, be it Insta or Tik Tok. Sorry facebook is not for the current generation but only boomers like us.
Things have changed, and I would not say for the bad but it really evolved and 12 year kids nowdays, act and think like we were in our 18s… they have outgrown their life faster than ever because of the exposure they have with the advent of the internet and social media. In fact they start absorbing right from their baby years whereas we started only when we went to kindergarten.
As I was having a chat with my girl discussing on what freestyle essay writing she should do, she asked if I did freestyle writing when I was a kid. Yes for sure, but the topics were mostly tied similarly to children stories like Pinocchio, Snow White, Robin Hood and similar… She told me those were boring and she would want to do one which is more inspiring… so I asked her to read some of our Options Trading Newsletter which always starts with a small story… to my surprise, she started to correct my spelling mistakes… I had less time proof reading before issuance lately, if you had spotted them too, my apologies…
I am truly happy that she is starting to outgrow me and become someone who can achieve even more than me in the future. If you genuinely nurture someone, that person will one day become a much better person than you. Share with all you got and don’t withhold as you will be surprise how far they can go.
"True success for a parent is not measured by their own achievements, but by the accomplishments of their children, who have the potential to surpass them and soar to new heights, carrying the lessons and love bestowed upon them."
SPX (4205)
SPX had breached 4200 level and stayed above on close last Friday. The Ai rally sparked by NDVIA earnings announcement which cast a very bullish outlook on its business that will be driven by the Ai boom. NVDA spiked up 25% this week post earnings and since October 22, up more than 250%.
Besides NVDA, the market also anticipated that the debt ceiling will be resolved soon as the Treasury was coming to scrap pennies by 1 June. Default was out of a question and the political fights on raising the debt ceiling should come to a positive close soon. In fact, it was agreed in principal on 28 May to make the debt ceiling increase so default will be avoided. Then suddenly Yellen came out and say, Treasury can still last their piggy bank until 6 June, giving more time for the Republicans/Democrats to finalise all their deals.
Market has already rallied in advance in anticipation, NVDA just helped keep the momentum up. But again behind this backdrop are all the gloom and doom which has been intentionally ignored by the bulls as that part of it is not so nice after all.
The market consensus for the next rate hike has dramatically changed over the past 3 weeks, coming down from 90+% of no change to 34.7% today! Even the expectation of rate cuts starting this year is already starting to diminish. VIX crept up all the way to 20 last week from below 17 and closed the week at 17.94. It’s a tell tale sign of the fragile market conditions and is not all blue sky. Many of the stocks especially tech is at 52 week high.
With Monday market closed for Memorial Day, expect a slow week as Non-Farm Payroll and Unemployment kicks in only on Friday. With 4200 level breached, lets see if it holds and if it does the next level up is 4300.
The trading range for the week is between 4150 and 4300.
NDX (14298)
NDX is raging on with more Ai power post NVDA earnings announcement, giving it a big boost up. Is it a last mile up before the rocket booster gets detached as it glides into space? From the last correction in March, it’s a continuous up, now for the 13th week. If you feel a bit of FOMO looking at the markets and stocks such as NVDA, MSFT, AAPL, AMZN and GOOGL, I think it starts to look toppish for now. As said earlier, some of these positions I have already exited taking in good profits even before some had ran further up. Example, the last runup end 2021, we exited MSFT at 325 and bought back at 225, so there’s no way to say you can sell every top and buy every bottom. As much as some say, just hold on and sleep on it for next 10 years mantra has worked in past, I guess what has worked in past does not really work at current markets because market dynamics have changed a lot with the onslaught of retail investors and algorithm trading coming into the picture, many driven by news and greed.
NDX had another week of 3.6% up rally. Including last week’s one it’s 7% in 2 weeks, it’s absolutely crazy chase up on big caps.
This is the 6 months price movement for the NDX, with NVDA and META leading the way with biggest percentage gains. The only few company which has surpassed previous 2021 highs are NVDA and AVGO(Broadcom).
The next key event which will ink the rate hike in June is CPI on June 13. As much as I would like the market to continue rallying, there is not much impetus after all the earnings frenzy and debt ceiling talks. At best another consolidation movement similar to April 22 levels for a while before passing June 13 CPI and June 15 Fed Fund Rate for the next big move. If interest gets hiked, probably a correction will make most sense, but again market nowdays is senseless most of the time and we will trade according to price actions rather than trying to make unpredictable predictions.
The trading range for the week is between 14000 and 14800.
HANG SENG INDEX (18746)
19500 levels were broken last week. As is the HSI index looks bleak as lower lows may be forming on weeklies. It closed below previous lows of 18829 and this week opened even lower continuing the downtrend. It is currently around 50% Fibonacci retracement level and if it breaks down, 61.8% as the next Fibonacci level.
OPTIONS TODAY - GLD STRANGLE UPDATE
We did this GLD Strangle on 20 April and was supposed to expire las week on 26 May. Price of GLD had rallied after entry and we rolled up the short put from 178 to 181 on 4 May.
After GLD had hit the highs and formed a double top, it moved the other way down and or short put of 181 went ITM on maturity date and we decided to roll it for a week collecting an additional $1.08 credit. In between, we closed the short call of 196.5 for $0.02 debit on 17 May.
This week, we would expect GLD to move up slightly higher as market seek cover from the coming CPI and Fed Fund Rate hike in the next 2 weeks. However, if SPX continue to rally in celebration of the resolution of the debt ceiling, we will continue to roll the short strike at 181 to buy more time for it to get OTM. The premiums of ATM GLD weekly strikes is around 0.9% a week. GLD should form support at 180 and around 100 MA daily line.
The current trade is already in profits today of 92% of initial trade credit. If it expires worthless this week, it will be 156% of initial trade credit.
Trade Options Chain which we can see the entry and each rolling of the initial trade. TASTYWORKS have a good way to monitor trades especially those involving a lot of adjustments/rolling.
Conclusion
It is common that prices moves up and down over time. It is important that we know what to do when prices move against us and take action to make the best out of it.
Remember, volatility will also start to kick in again soon and hopefully after we exit this GLD strangle, we can do another one when IV pumps before the CPI. Checkout below TikTok for our Volatility Play on GLD.
TRADERS TALK
Well, not much have happened since our last Traders Talk. SPX is still rangebound while NDX is on a speed train upwards. Lets see when we can catchup and I hope it will be soon. If you have any questions, do write to us on support@mystylework.com.
Send us an email @ support@mystlework.com if you have any questions and we can cover them during the show.
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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.