Happy Friday and another profitable week for you!
When buying the market seemed foolproof, weak hands were flushed out as velocity of risk raises its head.
For the last several weeks, I’ve discussed the major disconnect with the stock market vs. the main street.
It was only a matter of time we’d see a big flush out as we did on Thursday.
The S&P 500 had rallied back to February 25th levels early this week and the Nasdaq 100 hit new all-time highs.
But our economy looks different compared to four months ago.
The Fed has created this tremendous market recovery by flooding the system with unlimited liquidity.
This rising tide lifted even the worse companies, which dropped the hardest on the sell-off.
Every week we discuss the fear gauge for the S&P 500, known as the CBOE Market Volatility Index (VIX).
I do that because it’s important to know how much risk the market has currently priced in.
Last week, the fear gauge for the S&P 500, known as the CBOE Market Volatility Index (VIX) was at 24.
That was still 10 points higher than when the S&P 500 index price was at the same level in February.
That means they were pricing in a large shakeout.
Today, the fear gauge for the S&P 500, known as the CBOE Market Volatility Index (VIX) is holding at 38.
This is 14 points higher than last week’s reading, which indicates an expected move next week of 83 points higher or lower.
That means more than ever we need to keep to the system and manage our winners.
Congrats on Your Wins!
Markets move quickly, and often we find ourselves moving onto the next trade without looking back.
However, when we have the chance to make a significant profit — it’s essential to take a second and celebrate your victories.
Here’s what some of you are saying:
Thank you New Money team. My first trade with VALE closed at $492 after costs I netted $453. I was not able to get into the flash buy for June 1st. Is it recommended that we do not enter trades the next day? -Tiffany B.
Receiving emails like those is one of the best parts of my job. Thanks for writing in!
Let’s talk shop...
- Buy-To-Open the Fox Corp. (NASDAQ: FOXA) July 2, 2020, $27 put (FOXA200702P00027000) up to $0.25 per contract or better, for the day.
- Sell-To-Close the Fox Corp. (NASDAQ: FOXA) July 2, 2020, $27 put (FOXA200702P00027000) at $0.40 limit or better, for the day.
Right now, we’re holding:
- GOODYEAR Tire & Rubber Co. (NASDAQ: GT) July 17, 2020, $5 put (GT200717P00005000)
Sell-To-Close the Fox Corp. (NASDAQ: FOXA) July 2, 2020, $27 put
Date: June 8, 2020
Reason: Our system spiked with new money being placed that shares would decline lower in the coming days.
Outcome: Closed for 60% gain.
Notes: This was played this exactly as we should with great timing. We definitely left money on the table. But, that is hindsight and it could have turned into a loser. Some readers have mentioned I'm taking profits too soon. It's better to get out early and avoid the ups and downs. It never hurts taking profits too soon. Any new money you make is more than the money you had. Managing risk is an essential piece of being successful. Anyone can put on a trade, it's how you manage it.
I’m looking forward to answering your most pressing questions this Wednesday.
If you want yours included, send yours now to [email protected].
Your privacy is important to us and I’ll never reveal your full name or email when answering questions or sharing feedback.
Have a great weekend and I’ll have a new trade for you on Monday morning.