Weekly newsletter of MYstylework - Issue #85
HALLOWEEN HORROR
HALLOWEEN HORROR...
People look forward to things especially if you are deprived of it for long. This was just what happened in celebration of Halloween in Itaewon, South Korea where for the first time people comeback to celebrate Halloween without mask after 3 years. A happy event ended in tragedy when more than 150 lives perished after a stampede in a crowded alley in Itaewon. My deepest condolences to the families and friends of the deceased.
We would never expect such tragedy but one should always be weary of its surroundings. The same in trading, however good and strong it may seem in any rally, never over allocate and take care the risk management. You will never know when the market can do a strong u-turn on you.
SPX - 3901
SPX is up 3.95% for the week, 148 points up. The 3800 held up nicely on the daily chart on Wednesday and Thursday retracement and forming a support level now moving up from 3600 level. The FOMC Fed Fund Rate announcement is expected on Wednesday's trading day, Thursday 2am (Malaysia/Singapore time). Expectation of rate hike is still 75 bps and anything beyond that will again rock the markets. So far the inflation has not gone down much but unemployment seems to be going up, which is a positive sign on the other side. The ADP Non-Farm Payroll is expected on Wednesday 8.15 pm and the labour's office non-farm payroll data on Friday night. Move would likely come off in the earlier release from Wednesday night itself with 2 key event on same day.
We would not discount a retracement back to the lows of 3600 level should the Fed give a statement that the earlier targeted 4.4% rate is not high enough. So trade carefully and lightly for the week.
This week's trading range is 3800 to 4000.
NDX - 11546
AAPL saved the week after and led the market out of the red for the week. MSFT and AMZN did not fare as good after both earnings this week but both recovered grounds with the market rally throughout Friday. NDX is shy from breaking the 11650 level for the week.
With the incoming major rate hike decision on Wednesday trading day, it will likely be a choppy week before we see any possible clear skies.
We expect this week's range to be at 11250 to 12000.
QUICK SAFE POPS...
When a stocks POPs up, having a call on hand would be the most potent instrument with highest profit. However, calls don't come cheap and if prices don't go your way and quick, the decay in options value will result in loss in value.
One safe way to ride the direction whether up or down is to do vertical spreads. Spreads are just an additional short leg added to your call, if you are long or put if you are short. The short leg will also cover for some time decay in case the stocks does not immediately go your way.
eg. Buy Call at strike 95 and sell call at strike 100 (Bull Call Spread)
or Sell Put at strike 80 and sell put at strike 75 (Bear Put Spread)
(both would have same DTE)
The maximum risk would be the debit paid and the maximum profit would be the width of the spread less the debit paid. Eg. if we paid for above Bull Call Spread for 2.15, the max risk is 2.15 and max profit is (5-2.15=3.85).
Here are some important areas to look at before entry:-
Best times to enter would be at price support levels for call spreads and resistance level for put spreads.
Selection of the short call/put strike would be the expected target price where you think the stock will go at expiry date. If you have no clue, use the expected move (1 standard deviation) as a gauge.
Risk to reward would be 1 : 1.5
Possible to exit when 75% of max profit reached or trend changes or price hits resistance.
For more experienced traders, you may also finance bull call spreads, with a short put. This will take a bit more of buying power. If the trade POPs up, the profit will come from both the Bull Call Spread and also the short put. If the trade does not go your way, the losses can be reduced from the premium received from the short put but only if the short strike price of the naked put is not breached, which also means you need to hold on the naked put closer to expiry for that purpose. You may even exit the Bull Call Spread earlier if the trade does not go your way and let the short put recover back the losses. However, such financing structures, we take only if by itself as a single trade, we are comfortable to take a naked put on the stock. At worst case, both the Bull Call Spread and Naked Put can also go into losses, which is a risk you need to understand. To reduce risk and high volatility, preferably structure on an ETF.
Tik Tok Videos
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What to expect for this week's market.. #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "What to expect for this week's market.. #optionstrading #optionsstrategies". SPX down 141 points (3.37%) last Friday after J.Powell speech | Monday another 27 points drop | but we see some slight support at 4000 level above daily 50 MA | .... Change My Mind.
Option Trade on JD - watchlist at last Traders Talk on 9 Aug. Closed today $922 profit 🤑 #optiontrading #tradingstrategy — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Option Trade on JD - watchlist at last Traders Talk on 9 Aug. Closed today $922 profit 🤑 #optiontrading #tradingstrategy". Option Trade JD covered potential trade during 9 Aug Traders Talk Entry 9 Aug Exit 26 Aug Profit $922 | watch till end to see the trade we did 😉 | Option Trades Adjustments - Based on Price Actions | .... YOU'RE MY SUNSHINE.
Hawkish remarks by J Powell crushed the market - pullback expected until Next FOMC in Sept 21. Watch for key points raised #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Hawkish remarks by J Powell crushed the market - pullback expected until Next FOMC in Sept 21. Watch for key points raised #optionstrading #optionsstrategies". Key Points For Traders | Here's what JP said.. | > rates will go up until inflation is down to 2% | .... Flip through.
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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.