By: Steve Smith
Every Monday at 11:00 a.m. EST, professional trader Mike Honig and I run our one-hour Weekly Academy Call, where we discuss broad macro themes and answer questions on options strategies, and delve into specific positions. Recently, as you may imagine, there’s been a lot of discussion, as well as suggestions, on how to “repair” a position that’s turned against you.
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On Monday’s call, I started with a broad take to “be careful” as the markets seemed to be moving under even less logic than prior months if that is possible. However, my conclusion was drawn from us seeing a wicked big-cap tech growth rotation into cyclical value — both seemingly running out of steam. The pockets of bubble, from SPACS to Crypto had also been deflated.
By “being careful,” I made it clear that I wasn’t bearish. Just be more discerning, and yes patience in choosing your trades. The S&P500’s (SPY) exactly where it was for five weeks; all the hoopla, crypto, politics, and earnings once again meant squat to index watchers. Of course, there was plenty of turmoil under the hood as the aforementioned rotation took commodities and related stocks on a joy ride — all while the previous darlings such as Zoom (ZM), or Virgin Galactic (SPCE) crashed and burned by over 60%.
Now, it just seems that the people are counting their chips and waiting for a new catalyst to give the market a new narrative and direction.
So, while the trade frequency has slowed down, I do feel a lot more in control, and running profits and losses (P/L) reflects this patient and defensive stance.
For example, On Monday I issued an alert to Options360 members to establish a bullish diagonal spread in Microsoft (MSFT). It wasn’t executed with our price limit. On Tuesday, we re-entered the order, and once again it wasn’t executed with our price limit.
Then this morning, with MSFT dropping to my targeted entry point with support at $240, the order was filled at our target price. The chart looks weaker than it did on Monday. But, I was patient for a good setup and to make the trade at an attractive price.
Will we need to turn defensive or simply cut and run? We shall see. However, one thing that I know is that I won’t be turning tail and chasing the bear down to lower prices.
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