A Bear Market Rally

February 4, 2022

Dear Trader,

In bear markets…

…every move higher gets met with heavy selling.

And that’s what we saw this week.

I know this may sound odd, but there isn’t a lot of fear in the general public right now.

We are in the bear market territory, but a lot think this is another dip.

And it makes sense after being in this mega bull bubble for the last decade.

A lot of investors right now didn’t have meaningful amounts of money in the markets in the financial crises in 2008 or the dot com crash.

But this can get ugly quickly.

Our game plan must remain the same with taking profits quicker and also rolling out a trade for more time.

That means we want to average into long-sided trades on red days and vice versa with short-sided trades.

And always remember to be patient and more rigorous with how we deploy our capital.

Let’s talk about the CBOE Volatility Index (VIX), aka the “fear” index, which closed at 23.

That means we dropped a few points from last week, but are still above the 15 key level on this index.

Now let’s talk shop.

Portfolio Update

Today, these positions expire.

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

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

DKNG Feb. 4, 2022, $18/15 put spread

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:

Buy-to-open the HOOD Mar. 04, 2022, $15 call

On Tuesday:

No action.

On Wednesday:

No action.

On Thursday:

No action.

On Friday:

Sell-to-close the HOOD Mar. 04, 2022, $15 call

Buy-to-open the SNAP Feb. 11, 2022, $43/50 call spread

Right now, we’re holding:

FCX Feb. 18, 2022, $48/$55 call spread

AMC Feb. 11, 2022, $19/$27 call spread

SNAP Feb. 11, 2022, $43/50 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.

HOOD Mar. 04, 2022, $15 call

Outcome: Closed for 40% gain.

Notes: I was expecting a bigger move before the weekend, but since that didn’t happen in the expected time frame. It’s best to close the trade and reestablish in a different expiration.

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

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

DKNG Feb. 4, 2022, $18/15 put spread

Outcome: expired worthless.

Notes: We never know when a stock is going to roll over, but with F, we took profits along the way and entered newer trade along the way to capture more of the move.

The DKNG wasn’t a good trade and I thought there might have been news about sports betting that would send shares lower.

No drinking for me and the marathon is finally here on Sunday, 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 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%