Weekly newsletter of MYstylework - Issue #66
SULKING BINKIES...
SULKING BINKIES....
Every baby would sulk on their favourite binkies sometimes for years as they do not like to change. It's like they have grown akin to it and cannot be separated.
But there is a time when we adults needs to cut them of the sulking habit and most of us would just hide their binkies and it is forever gone. They adapt to it sooner or later but not without some days or weeks of sleepless nights for the parents.
The same for us adults, we grow into having our own habits be it good or bad. These habits are difficult to change and would require a strong catalyst or motivation to effect habitual changes.
Here's a good exercise for you guys to do. List down 3 good habits that you would want to strengthen and continue and another 3 bad habits that you would want to change or require imminent changes.
For the next 3 months, see if there are improvements in the good habit and if you manage to drop the bad ones. Have a journal or a checkbox daily if these task are done. Send me a note after 3 months on your results.... 😉
A change in bad habits lead to a change in life....
SPX - 3900
SPX is set to retest the lows again next week as the market reacted negatively to the CPI data announced last Friday where inflation rose in May to 8.6%. Inflation is not sizzling down at all despite 2 rate hikes implemented. One of the targets of the Fed is to control and manage inflation and seems it is getting much success and the market now fears that they may put the rate hikes even more aggressively in the months to come.
Lets see what the Fed do on the next rate hike announcement on Thursday, 16 June and how they will set the markets for the week. Expect volatility to continue for the week.
Trading for week to be around 3700 to 4100 range.
NDX - 11832
Another brutal week for Nasdaq, down 5.7+% ( 715 points). Things does not look too good for time being with NDX coming back to its lows just like SPX. Triple bottom, here we go.
One consolation which we might have is that if NDX survives this week without staying long below previous lows of 11500 then the coming bounce will be quite strong. We need to monitor the price action in the coming week closely.
NDX trading range for the week is 11100and 12500. Futures opened lower today, very much lower.
ROLLING OF TRADES
If you are a real options traders, one skill to pick up is rolling of trades. if you have not heard of rolling trades, it means you are still limited to trading single options mostly either buys or calls.
Basically rolling is an option adjustment to your existing position by either rolling:-
#1. Strikes ie. changing strikes up or down
#2. In time ie. changing the duration or extending the DTE of the current option contract.
#3. More advanced - Both #1 and #2 together.
Reasons for Rolling
Collecting more premiums. Eg. in a diagonal trade where the short option is expiring or with very little extrinsic value left, we roll to collect more premium. Or a cash secured put, instead of waiting for expiry, or closing the trade, we can roll the trade for another period to earn more premium.
The trade is going against you. Eg. You are in an Iron Condor and the price goes down to your Short Put Spread side and going ITM for the short put or even the long put. We roll to extend the trade to buy time for the price to recover up.
Or in a cash secured put, where the short put is ITM, we roll to buy time for the price to recover above the short put.
Or if you are in a strangle, you roll down the untested side of the short calls if price drops.
More advance rolling would involve both rolling to different strikes and also DTE.
Effects of Rolling
Most of the time, the rolling should allow us to derisk the trade. It should never add on to the risk. We derisk if we can roll for a credit. If we roll for a debit, we will add on more risk as our max loss of the trade which includes the roll would increase.
Example
Say we sold a Cash Secured Put on 20 Aug for Stock X DTE 17 Sept 57.5 Put for $1.15 premium. On expiry the trade went ITM below 57.5 strike. We can either close the trade and take a Loss of 1.60 or roll in time to 15 Oct same strike 57.5 for additional premium net of 0.35.
To roll we buyback the 17 Sept put for 2.75 and sell another put for 3.10 premium. Collecting net 0.35. Although the strike is ITM, the additional time in the new roll would give us more extrinsic value premium to cover the price to buyback the expiring option.
What it means is we extended another 1 month duration for stock X to recover back above strike of 57.5 so we can exit the trade with the full profit. We also derisk our trade by generating additional premium of 0.35 hence reducing the max loss from $5635 to $5600.
Of course, the trade will have to eventually go our way to profit. In event, it does not, as long as we do not risk more we can continue to roll perpetually if we decide to do so. Otherwise, we consider if we have loss less by being longer in the trade or cut the position to move on for other trades if the chances of price action recovering to our advantage is low. These are generally how we make decisions whether to roll or not.
It takes time and experience to feel for how the trade behave on rolling. But don't rush into it, practice makes perfect. Happy rolling.
TRADERS TALK
Did you hear last week's Traders Talk?
We had a great topic and so much insight on trading was given out. Apologies for the bad and intermittent connection.
Listen to Traders Talk Series 50 if you have not done so. View Past Traders Talk here.
Remember to join us every Tuesday 7.30 pm on my Facebook Page. Follow-us so you will be notified when we go live! Follow and click on the notification button, so you will never miss a show.
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THRIVE OPTIONS BUSINESS BUILDER
For those who had the chance to grab the Thrive Options Business Builder last month and had taken action, congratulations. We are excited to have you on board our advance training programme where eventually you will build yourself an Options Business generating high double digit returns but only with a fraction of capital used.
Over a period of 12 months, you will not only learn advanced options strategies, you will also be guided on execution of these strategies. We are still open for new registrations and it is not too late to learn some additional options strategies and implement them still for the new 2022 trading year.
The registration link is here.
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.