How to Find Good High-Probability, Defined Risk Trades
By: Steve Smith
It’s been a crazy week on Wall Street and I’ve been getting a lot of emails asking what people should expect.
I can’t give individual advice, so I just want to let everyone know here what I expect to happen over the next few weeks and months.
First with GameStop.
GME has been a short killer for years. There are serious problems with their business model. However, they keep chugging along, paying a dividend and they are under good management.
That said, they are clearly not worth over $300 a share – and everything reverts back to value at some point. So I expect the mania to calm down and the share price to go back to a more reasonable valuation.
Hopefully, for them, they can issue some new stocks and take advantage of the high valuation before it does.
The brokers who restricted trading are getting slammed in the media for colluding with the hedge funds.
Maybe, or maybe they were just trying to avoid lawsuits when GME does revert to a reasonable valuation. Brokers have a fiduciary responsibility to protect retail investors.
I suspect how they articulate their motivation for the restricted trading will determine a lot in the media, in court, and in Congress.
If Congress decides to hold hearings, that is.
As far as the market, as I write this Friday afternoon the Dow is down over 700 pts.
The Fed reiterated their commitment to low rates and to continue their $120 billion a month bond-buying program. I suspect the market is just spooked by all the GameStop stories.
At the end of the day, it’s a bull market until the market proves otherwise.
Cooler heads will prevail. Markets can make crazy moves in the short run but everything regresses to the mean eventually.
So I am doing what I always do…
Finding good, high probability, defined risk trades for my Options360 subscribers. That’s why we consistently beat the pants off the market every year, and I am confident we will again this year.
Have a great weekend!
To Your Success,
PS. You can still grab your trial membership. It’ll be the best money you ever spent!