Today is a great example of seeing money rotate out of a hot sector into the lagging sector.

The technology sector is seeing money flow out and into the financial and industrials sectors.

Financials and industrials have been lagging on this rebound. 

This is how the big boys keep money at work without going into cash isn’t worth it. 

I don’t see this rotation lasting long, but it bodes well for the most recent position in Vale S.A. ADR (NYSE: VALE) July 17, 2020, $10 call (VALE200717C00010000). 

We’re sitting in the green with double-digit paper profits. 

We are nearing the profit zone and once it hits, I’ll send you an immediate profit sell alert. 

Without further ado, let’s jump into this week’s mailbag. 

Your Questions, Answered!

Hi Joshua, 

When is it too late to get in on one of the Hot Money trades? Should I just wait until the next one?  -Bill W.

Hi Bill,

Here’s how to best handle that.

Your goal should always be to get a better fill price than what is listed on the Hot Money buy alert. 

With that said, I don’t want you or other readers to chase and pay too much. 

Every nickel counts when trading options. 

If the price of the option goes over our buy-up-to price, it’s best to wait until the day and see if you are able to get in at the same or better. 

And know that we always aim to reflect the price at which Hot Money Traders are getting their fills in our official prices.

I aim to send you a trade every Monday morning, so if you missed out, there’s more opportunity around the corner.

If a position moves too fast and I know most readers weren’t able to take part, I will provide a bonus alert. 

I’m here for you step-by-step.

Hi Joshua,

What do you think about setting a stop loss (let’s say around 25-30%, for example) on your trade recommendations?  -Sam P.

Hi Sam,

This is a question I get asked all the time.

The best stop loss is knowing your full loss before putting on a position. 

That’s what I mean when I say every trade is won before it’s ever put on.

When entering into an options trade, it’s smart to have an exit for a loss or profit.

When using options, there’s a lot of choices with strikes and expirations. 

That is why it’s important to have the same approach for every trade. 

Everyone's risk tolerance, account size, and reaction to losses are different. 

With today’s volatility and getting whipped around at times, I can’t blame you for wanting the extra protection.

This could mean using a stop loss, but I often say reduce your position size.

If you are considering using a stop loss, here some things to consider. 

Our short-dated options trading approach does oscillate quite a bit.

But they have limited downside risk — and unlimited upside potential.

Even if one of our positions is in the red by a fair amount, there’s often plenty of time for that to turn around.

If you use a stop loss, you may end up closing out too soon for a loss on a trade that’s got plenty of time to turn into a win.

This will create even more frustration. 

Not only does it drain your account, but also your emotional capital. 

Often times a trade doesn’t go our direction right away. 

If that is the case we’re out less money than owning shares.

That’s why you won’t see me offer any official stop loss recommendations.

Our limited risk options allow us to trade profit opportunities with greater flexibility — and much higher potential gains.

This approach as fared well, especially in today’s conditions.

As a trader, you decide what’s best for you. If you prefer setting a stop loss on these trades, you can.

I can’t provide you personalized financial advice 

But, from my backtesting results, I can provide an ideal stop-loss amount I discovered.

That amount would be a 60% stop-loss.

That means if you pay $1.00 per contract, then the stop-loss would be at $0.40 per contract.

If you plan on using stop losses, your results will differ from what we’re tracking.

Thanks again for your question.

Those were some great questions to kick off our first mailbag. 

I look forward to answering more next week. 

If you want your questions answered next week, make sure you email it in today at [email protected]

Talk with you on Friday.