Weekly newsletter of MYstylework - Issue #67
REALITY BITES...
REALITY BITES....
Everyone want's to make loads of money and become rich. Many people just dream of it but never put in the effort. Many people also put in a lot of effort but never achieves it. This is the reality.... not all things are easy and not all things are guaranteed.
Just like in the current stock markets, crypto market, NFT market or even the property market, things does not look too good and rosy anymore. In fact, the news has portrait it as all doom and gloom. A contrast to what it was 2 years ago just when the pandemic hit and we saw the market jump to all highs and many had made tons of money, in fact more than what they did in past many years.
So now, we take a reality check and "Reality" really bites. If you had held on to many of the stocks, cryptos, NFTs or property since pandemic and still hung on to it, you will be back to square January 2020, maybe some even worst, meaning your net worth have declined.
What have we learnt in this 2 years is that when super profits comes, you better take it and run because most of the time, things tend to come back to mean. A boom never continues to stay boom forever but at times it will take a breather and stay back for a while.
Taking profits is again one skill every investor or trader have to learn. We are not sentimental to any of the stocks or assets we hold and don't be sentimental and lose sight of why we trade/invest in the first place, which is to grow wealth.
Reality Bites and the bite can be very painful....
SPX - 3674
SPX down almost 6% for the week and 11% for the past 2 weeks. All this anticipation and pessimism in the markets is a bit tiring as the process is like an old rerun of a TV show, perhaps "Friends". Do you recall "Friends", it was nice once ago but after 10 reruns, it is kind of boring. Every month, we will have Fed Fund Rate hike meetings until the rates goes to 4% or something, so expect the expected monthly volatility cycles. Ride it up and ride it down...
I think this week, there's not much happening on the calendar, just Friday Fed Member Bullard will speak. How do I know? Go check calendar of important events in forexfactory.com.
This week's SPX trading range would be 3500 to 3800. Past few weeks, it has been closing the week on the low end, this week I expect it will trade on the higher side as market seems very oversold now. Get go for the bulls this round.
NDX - 11266
Relief rally on Friday... but definitely not enough to cover for the losses in your long term portfolios as NDX have gone down 11% also past 2 weeks. The trend is similar to SPX mainly due to the risk off sentiment pre major Fed announcement or even CPI as we saw last week.
There will never be a right time to buy in your favourite NDX stocks... it always seem cheap as most of the good ones are below their intrinsic valuation but can always become better deals every other week.
My eyes for this week is on GOOGL, and this stock is just waiting for a relief rally to run up in anticipation of the stock split coming up on 15 July (recheck final dates closer). One thing I learnt on the Amazon split, exit before split as they charge trading commissions on 20 lots when you paid 1 lot to enter the option trade. AMZN run up post split was only 1 day, so exit before is always the less risky choice. However, if market continue to be conquered by the bears, not likely for any runups then.
Nasdaq expected trading range this week is 10600 to 11600. Futures opened positive today, expect some recovery rally till mid week.
QUALITY VS QUANTITY
In trading, quantity does not results in higher profits. Quantity as in opening of different positions on different tickers. In fact, it is very difficult to adjust when market changes as there are just too many which will not go your way. Even if you are trading Delta neutral, the portfolio adjustments are going to be challenging. In the current market environment when the sustainability of each movement whether up or down is not long, holding on to trades for extended time will have negative consequences. Profits will turn into losses when prices reverses and you may run out of time to wait for the trend to go back your way.
So the trading pattern for option sellers are now slightly changed for duration. In past, we hold on trades longer to maximise theta decay, now we will not be able to optimise full theta decay without being challenged on our strike prices. So we can either exit earlier even below the target of 50% to 25-30% to capture short term rallies. To get back the same kind of profit value wise, you may do 2 lot instead of 1 lot. But please consider doubling up trade quantity means doubling up the Buying Power or Max Loss. So consider if your risk management allows you to do this.
As we change the trade patterns, and go less on quantity (ticker) we have to find high quality trades. As in, don't just go into trades blindly, set target entry prices if certain rules are met, eg, stock is trading on oversold levels etc. Use some set of entry rules and wait patiently. No trade is a good trade, remember. Review this Traders Talk for some form of indicator which can be use for trend reversal trading. There are many out there, practice practice practice.... and be patient is key....
I have dig out below from one of the shows, for reversal indicators. Have fun watching this rerun...
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 51 if you have not done so. View Past Traders Talk here.
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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.