I sound like a broken record, but everything is going up.
The S&P 500 continues to notch all-time highs, which is now up 7% year to date.
The U.S. dollar has been sliding lower for the last few months.
This slide lower has been fueling this monster move in the equities market.
But too much of a decline would turn into a bigger issue.
Right now, it’s been holding its lows, but it’s likely going to make the next big move lower.
When that does happen, we could see equity markets pull-back.
The fear gauge for the S&P 500, known as the CBOE Market Volatility Index (VIX) is holding at 22.
This means that volatility continues to be elevated.
That means keep your head on a swivel and be ready for a quick snapback.
On Monday, we added our newest position:
- Buy-To-Open the ANGI Homeservices Inc. (NASDAQ: ANGI) Sept. 18, 2020, $15 call (ANGI200918C00015000) up to $0.90 per contract or better, for the day.
Right now, we’re holding:
- Nordic Amer Tankers (NYSE: NAT) Oct. 16, 2020, $5 call (NAT201016C00005000
- Cameco Corp. (NYSE: CCJ) Sept. 18, 2020, $12 call (CCJ200918C00012000)
- Snap Inc. COM (NYSE: SNAP) Aug 28, 2020, $23.50 call (SNAP200828C00023500)
- ANGI Homeservices Inc. (NASDAQ: ANGI) Sept. 18, 2020, $15 call (ANGI200918C00015000)
We’re in a winning drought and it’s frustrating that we haven’t been able to lock in any big winners.
Like hitters in baseball, there will be these types of streaks before we heat back up.
What happens to most traders, is that the monkey chatter starts to dictate their emotions.
The financial markets are a big math equitation.
That is why I never worry about losing.
At a 70%-win rate, there's a 62.5% probability of having three losing trades in a row.
But the probability of having four losing trades in a row is 24.1%.
By knowing our numbers, I focus on playing to win.
Let’s keep focused and let the market come to us.
And I’ll be keeping you updated every step of the way.
Your Questions, Answered!
The mailbag is full, so let’s get to your most pressing questions.
“On Monday you recommended buying the ANGI Sept. 18, $15 calls with a limit of $0.90. My broker said to use a higher limit because the ask price was higher. Should I change the limit if the ask price is higher, or should I use the specified limit?”
If not, then you can evaluate it.
If prices haven’t increased by over 10%, then you could consider increasing the limit price.
Let's cover the basics of order entry by covering the bid and the ask prices.
The bid is the price at which traders want to buy the stock or option, and the ask is the price to sell the stock or option.
Every trade idea you receive will have a price limit.
That indicates the most we are willing to pay to enter that options contract.
If the bid/ask is higher than the limit price, then we will not get filled until prices come into our level.
With how market work and competition among high-frequency firms and exchanges, it's often we will get in at a better price.
In your online brokerage account… whether it is E-trade, Fidelity, or Robinhood… the broker is recommending you increase your limit order because it is higher than the asking price.
In your case, the seller of the option was asking for a price that was higher than our limit at that moment.
The bid/ask changes due to supply and demand.
Once an alert hits, other readers are trying to get in as well which increases demand.
And that’s what you want to avoid!
Your goal should always be to get a better fill price than what is listed on the buy alert. If the price of the option goes over our buy-up-to price, it’s best to wait until the next trade.
I watch the price of all our trades.
And right after the ANGI recommendation went out, I saw a lot of options traded at our limit.
Your online brokerage should fill at the ask price if it’s below the limit price you set when you place your order.
The extra room between the bid/ask provides protection against any dramatic increase in price.
Don’t chase the option price higher than the limit!
That’s it for me today, be on the lookout for our next profit alert!
If you want your questions answered next week, make sure you email it in today at [email protected]
Talk with you on Friday.
Joshua M. Belanger