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Trading Sardines and Tech Stocks, How NOT to Lose in This Market

Trading Sardines and Tech Stocks, How NOT to Lose in This Market

Posted On August 31, 2020 3:34 pm
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Salesforce – a company with a market cap of about $180 billion – jumped 25%…

Netflix – a $241 billion company – jumped 11%…

And Facebook – an $865 billion company – jumped 8%…

As I watched the market, I started thinking of the old story about “trading sardines.”

As the story goes, in California sardines started disappearing from their native waters, and so people started bidding up the value of sardines. 

When the price was at a ridiculous level, a buyer decided to treat himself to an expensive meal.

He opened a can and ate a sardine…

And immediately became quite ill. 

He went to the seller and complained that the sardines were bad – to which the seller said, “You don’t understand.  Those are trading sardines not eating sardines!”

These stocks remind me of trading sardines…

No one is looking to see if they are healthy or strong or can support these valuations…

They are just being bid up because there is so much liquidity in the system and the money has to go somewhere.  It’s not going to go into bonds with rates as low as they are…

So it goes into stocks. 

And tech companies are bid to the moon. 

The trick is to make sure you are profiting from the run-up, without getting caught when the valuations drop back to a reasonable level.  Pricing like this always reverts to the mean!

My Options360 service is based on making trades that protect your downside while giving you as big an upside as possible. 

I did a great breakdown about how we find and vet trades in Options360 with my publisher, Adam Mesh.  

We pull back the curtain and explain the trading philosophy, then go through some real trades so you can gain a thorough insight into how we do what we do. 

You can watch here… and I suggest you do right now.

To Your Success,

Steve

 

About author

Steve Smith
Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.

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