By: Steve Smith
There’s a lot to be concerned about in the markets right now.
Yesterday’s rally seems to have failed. I suspect it was just enthusiasm about the BOE intervention to stop a “Lehman Moment” in England.
But the Fed still seems to be dedicated to fighting inflation, so the momentary exuberance has just opened a window for people to sell.
As I said to Options360 subscribers today, if a reasonably orderly bear market and 5% interest rates can put us on the edge of a financial crisis, things are not good right now.
It’s the same lesson that never sticks…
Leverage increases returns, but it also increases risk! That means you ALWAYS need to be hedged.
For us that means…
NO NAKED TRADES!
Never! No matter how sure the trades, no matter how likely you are to win.
I won’t ever forget my first trade. A sure thing that was going to pay me $1,000 overnight ended up costing me $50,000 when it went against me.
Sure things are only “sure things” until they aren’t
If I could make that same trade again today — the trade that cost me $50k — I would’ve hedged the trade and collected $600 in premium and only lost $2,000 when it went against me. Maybe $3,000…
…but NOT $50,000!!
If you’re not familiar with the details of the trade I’m talking about, maybe I’ll share it again soon.
In the meantime, in Options360, we took some profits in a trade on TLT this morning, and I am waiting for the market to stop being schizophrenic so we can jump back in with both feet.
There are lots of trades I am watching, but before I risk subscribers’ money — and mine — I want to see how the SPY acts at the $3620-$362 support levels and how the 10-year at 4% affects the market.
Once we have that locked down, we can start booking profits again.
Right now is the perfect time to claim your trial subscription to Options360. It’s only $19, there’s no risk on your part…
And I have a feeling that when this uncertainty calms down — there will be a LOT of opportunity for us to jump on.
To Your Success,