The
“Knee Jerk” Reaction in Trading
Yes the dreaded “knee jerk”
reaction has occurred several times in the last couple of weeks. Why? Ukraine and a whole lot of
speculation. What am I talking about you
might be asking yourself. Let me tell
you what I’ve heard the last couple of weeks:
The 20% plus market
correction is occurring
We
are at war
The Russians are going
to war
The market is going to
lose half its value
The market is straight
bearish from here on out
This is the start of a
big bearish move
We had our bounce back from last week and I know too many people lost
money in the market instead of taking advantage of the trend. Due to my conversations I felt the need to
write a blog about “knee jerk reactions”.
Let me make it simple for you who are following my blog right now. YOU MUST have a methodology that allows you a
little wiggle room to allow the market to move.
Yes, I thought we would come back last week from Ukraine. Why?
We saw how “un-important” Ukraine was the previous week. A big Monday drop and a great rebound on
Tuesday. I had many of you ask me how
did I know the market would bounce back?.
Why did you buy into weakness (which is something very difficult for me
to do)? How are you able to sit through the last two weeks?
Learn how to SPOT the turn. I also have a methodology I actually
follow! We had no confirmed crossovers
on my technical indicators to start to position for a bearish market. The same scenario occurred the previous week
and I learned from my past
market experience. I think there is no
real substitute for experience. I could
have been wrong and been a little late compared to everyone who positioned for
a big 20% correction. But I wasn’t and
the majority of the time (85% plus) I will be right more often than you. Am I smarter or better than everyone
else? Heck NO! I am just a little more patient and have a
methodology that makes me great money in a year like 2008. I have a mythology that protects some of the
downside movement and years ago I quite trying to outguess the market.
Now I’ve spend lots of money, time and gained experience to
use options to my advantage in today’s market.
NO they are not risky IF they are used correctly. I can’t tell you how important it is to get
an education to learn how to put your trading methodology into practical
application. Let me show you a couple of
trades with options to allow me to weather some of the volatility and to do so
for a profit.
AAPL – I had shares and
needed a little downside protection two weeks ago by taking in a $4 plus
credit.
BIDU – I had downside protection with long
puts. It gives me the right to sell the
stock @ $175 a share until the third Friday in April. To help pay for that I sold a put @ 165 for
$8.189 per share. Notice that I now have
700 more shares than the 49 contracts of put vertical. I added shares at the $160 range.
DIS
– I had March $80 short calls and now sold April $85 short calls for $0.85
credit into the account. I now have to
sell Disney at $85 plus my $0.85 credit is mine to keep. Not bad with a $66.818
Purchase Price. Notice I have 7100
shares with 59 contracts of short calls.
Yes I added 1200 more shares with DIS under $80 a share.
NVDA
– I had 8500 shares and some greedy Jan 17 Long calls to make some big money
with Leverage. I protected them at the
money (ATM) before earnings at $16 a share.
It cost me $0.82314 per contract.
I am selling an 18 Short put for a credit of $0.57959 to pay for my
protection. Good thing I also sold some
17 short puts for $0.38 to book $0.21 a contract already. I am basically able to pay for my protection
on the stock thru the earnings NVDA had.
V
– Visa is one of my core holdings and the support level at $220 held. Added more shares at $220.81 average to see a
bounce.
Why
I am showing all these? Find a way to
trade your methodology during the hard times in the market. OR, have someone trade for you that will not
be emotionally attached to the funds in the market. Get an education to teach you thru weekly
trades to gain market experience. Call
me to find a way to take money from the market instead of giving your hard
earned money to the market – 888-287-1030. We
all need to be making money with the bullish market we’ve been given. If this article strikes a chord let’s talk
immediately.
