Today’s writing will be relatively short as I’m about to start my nine-hour drive back to Florida.
After watching the first couple of hours of trading I decided to bail early in order to get home and be well rested for tomorrow.
This morning, I planned to scoop up a few names and then use the VIX to protect against the downside. Last week, I shared why I thought the VIX was too low, and it could pop if there were more downside to stocks.
Well, stocks opened lower and I established AirBnB (ABNB) and SPDR S&P 500 Trust (SPY) bullish positions along with a VIX ratio call spread.
But, the stocks dropped and VIX was barely popping. Uh oh! I’ve seen this before. In fact, I tried this trade, with two other names plus the VIX last Thursday and quickly closed all three positions, miraculously for a small, as in tiny, profit.
Same thing this morning, except it, was a small loss.
All told, over these two days, Options360 Concierge Trading Service members and I are even. These are days where the Dow dropped a combined 1200 points and the SPY’s down another 3%.
Many of us use sports analogies when discussing trading. I’ve often compared it to boxing and said we’re currently in a ‘jab-and-move’ environment. If you don’t see an opening for a knock-out punch, at least try to win on points.
A colleague uses poker as an analogy; if he doesn’t have two good hole cards he shucks them. In other words, he doesn’t play in that particular game. His mantra is, to look at a lot of cards, but hold very few. He only plays the ones that will give him a high probability of winning. Folding hand-after-hand might seem boring, but it keeps you at the table.
Again, the market right now is characterized by relentless-but-orderly selling. It’s hard to sell new lows, rallies don’t last, and fear is still not in the air.
Right now the best course of action is to be a patient observer. Initiate a trade or two if the setup seems attractive, but be quick to fold if the next card/price move doesn’t improve the position’s situation.