Excuse the obvious, but what a hot and cold market.
Yesterday, stocks sold off…
...Then a snap back rally today to new all-time highs in the S&P 500.
Market environments like this are frustrating for everyone because we go up and then down as fast.
Short-term traders keep getting whipsawed, which has been happening to us.
And the choppy action causes our option trades to decay as time passes.
It’s frustrating, but we don’t make shots if we don’t take them.
Saving our emotional capital is important during market environments such as this because it’s what will hold you back from taking opportunities, which is when you miss the big moves.
That’s why it’s important we continue to be engaged, but during market environments like this, I’ve had success with playing a little loose to avoid getting whipsawed.
Now, The CBOE Volatility Index (VIX), aka the “fear” index, is still above our key 15 levels, trading at 16.88.
What this tells us is that we are in a bull volatile market.
That means the market bias is still higher, but it will likely be choppy and picking our spots will be even more critical.
Now let’s talk shop.
Here’s a recap of what we did this week.
Buy-To-Open the Petrobras (NYSE: PBR) June 18, 2021, $8 call (PBR210618C00008000)
Sell-To-Close the Apple Inc. (NASDAQ: AAPL) April 23, 2021, $139 call (AAPL210423C00139000)
Sell-To-Close the Ford Motor Co. (NYSE: F) April 30, 2021, $12 call (F210430C00012000)
Buy-To-Open the Melco Resorts & Entertainment Limited (NASDAQ: MLCO) May 21, 2021, $19 call (MLCO210521C00019000)
Right now, we’re holding:
- Schlumberger Limited (NYSE: SLB) June 18, 2021, $40 call (SLB210618C00040000)
- NRG Energy, Inc. (NYSE: NRG) May 21, 2021, $40 call (NRG210521C00040000)
- Rocket Companies (NYSE: RKT) April 30, 2021, $24 call (RKT210430C00024000)
- Melco Resorts & Entertainment Limited (NASDAQ: MLCO) May 21, 2021, $19 call (MLCO210521C00019000)
- Petrobras (NYSE: PBR) June 18, 2021, $8 call (PBR210618C00008000)
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.
Apple Inc. (NASDAQ: AAPL) April 23, 2021, $139 call (AAPL210423C00139000)
Date: April 13, 2021
Reason: Our Hot Money monitor triggered this new buy after 12k calls traded and were mostly bought in the April 23, 2021, $139 strike.
Outcome: exited calls for 84% loss.
Notes: We followed the system, but I didn’t play out nor did I execute. There was a bull flag forming on the daily chart and anticipated we would see a move higher. But the choppy market and time ticking away, I called an audible. It was the wrong call. I have to get better and execute.
Ford Motor Co. (NYSE: F) April 30, 2021, $12 call (F210430C00012000)
Date: April 5, 2021
Reason: Our Hot Money monitor triggered this new buy after 27k calls traded and were mostly bought in the April 30, 2021, $12 strike.
Outcome: exited calls for 81% loss.
Notes: We followed the system, but I didn’t execute as I planned. This trade was in the green the following day, but didn’t move high enough to trigger our profit target. Then it slowly drifted lower and then the floor dropped. If I honored the original stop loss, we would’ve been out. But that’s the issue with stocks and options. I have to get better and execute.
Just remember, the sweet is never as sweet without the sour, and right now we know the sour.
So, we keep working and doing what we love and focus on getting back on track.
Now it’s time to head to the pool with a fresh jalapeno margarita - TGIF!
I'll have a new trade on Monday and have a great weekend.
To your wealth, freedom, and options!
Joshua M. Belanger