3-headed Economic Dragon is Here

January 14, 2022

Dear Trader, 

At first, it looked to be profit-taking…

…Because high growth stocks were Wall Street’s inflation hedge for the last 2 years.

But in the last two weeks of December, we started to see money exit high growth stocks.

And now it is becoming more clear that the 3-headed economic fire breathing dragon (inflation, jobs, and interest rates) is at the forefront. 

The core CPI came in at 7%, but if you use the previous calculation used in the ’80s; it would be 15%. 

The Fed is talking a big game about being aggressive with raising rates, but at this point, it looks like they are bluffing. 

That’s because if we look at the CBOE Volatility Index (VIX), aka the “fear” index. It closed at 19, which is 4 points above our key level of 15.

But even with the weakness of Tech, we’re still in a bull regime market. 

So pullbacks are orderly and watch out for the dip buyers like what we saw on today’s market action. 

That’s why we focus on the system and where money is going. 

Portfolio Update

Today, these positions will expire.

  • GILD Jan. 14, 2022, $74/77 call spread
  • AAPL Jan. 14, 2022, $185 call

Unfortunately, we don’t have more time for this to play out.

There’s nothing that you need to do, and they will be removed from your account over the weekend.

Taking losses isn’t fun, but without the bitter, the sweet isn’t as sweet.

But remember…

The sweet part is making money and losses are part of the process.

Here’s a recap of what we did this week.

On Monday:

No action.

On Tuesday:

No action.

On Wednesday:

Buy-to-open the F Feb. 4, 2022, $25.50/26.50 call spread

Buy-to-open the F Jan. 21, 2022, $25 call

On Thursday:

Sell-to-close F Jan. 21, 2022, $25 call

On Friday:

No action.

Right now, we’re holding:

  • F Feb. 4, 2022, $25.50/26.50 call spread
  • F Feb. 4, 2022, $26/27 call spread

Trade Journal

This is my journal which is a debrief of every trade closed or expired to analyze what happened, why it happened, and how it can be done better — like what the military uses after missions.

F Jan. 21, 2022, $25 call

Outcome: Closed for 168% gain.

Notes: One aspect of trading is being able to maximize one opportunity. This was a stock that didn’t treat us too well in the past, but that’s why every trade is different.  We executed this trade perfectly.

GILD Jan. 14, 2022, $74/77 call spread

Outcome: Expired worthless.

Notes: We took a shot and this didn’t play out. 

AAPL Jan. 14, 2022, $185 call

Outcome: Expired worthless.

Notes: I have traded this one foolishly and this loser falls on my shoulders. 

No drinking for me until after the marathon on February 6th, but that doesn’t mean you can’t enjoy a fresh spicy margarita for me - TGIF! 

Have a great weekend and talk with you on Monday.

To your wealth, freedom, and options!

Joshua M. Belanger
Joshua Belanger is founder of CounterVest and the editor of Hot Money Trader. He has been providing ordinary investors blockbuster returns since 2008. In 2018, the average return of Hot Money Trader beat the markets by over 15%