by Gavin M.
It should already be known by now that I am a bear when it comes to the markets. The tell really is when I am quiet on Twitter. If you are a bull, you could use that to your advantage. As far as this market is concerned, today's bounce was expected. I even said it yesterday that we could be in for a bounce. The markets continue to be range-bound and should be traded as such until something significant happens. What I really find so surreal is how resilient the bulls were today. Sell offs were quickly bought up and you could not even touch a support line without a big bounce to the upside. You really have to admire whomever these people are defending the bid. In some ways when the day is easy - you will enjoy trading. But when days like today happen, it becomes extremely challenging. It is always about being able to be flexible in the choices you make in your trades. While a lot of traders out there romanticize the business we're in, it's not always rainbows and unicorns. It's not to say that trading isn't a rewarding and fruitful endeavor, it does always come with its own unique challenges. I bumped into one of the guys I golf with at the local club. This guy drives a Maserati. Imagine my shock when he asked me if I could teach him how to trade. Of course I said no, because I don't have the time right now. However, I did refer him to my company, Equity Sense. When I told him it would cost him a few thousand bucks, he cringed and asked for a discount. Naturally I would be more inclined to do so for people who I know may be financially challenged. But, if you are going to talk to me about lowering rates and you drive a Maserati while being a member of a club that charges you $30,000 a year, it is quite laughable. In the end I told him he shouldn't be a trader because nobody will teach him for cheap. Good luck tomorrow for the NFP bonanza!
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by Gavin M.
The reality is, majority of options traders in this market are clueless on how to effectively use options as a trading tool. Most even do not know how to properly use the option Greeks. I find this absolutely hilarious considering they put their hard-earned money on the line. For retail traders like myself, I do not have the unlimited funds given to investment banks like Goldman. So I have to make do with the funds I have and efficiently deploy them to the best of my abilities. I am aware that the options market is extremely rigged to favor the market makers instead of the options traders. In addition, there is an overwhelming belief out there that you should only ever sell options not buy them. While that is quite true, what people also do not consider is the fact that you can get assigned before expiry. I have been in instances where I have been called away before the Friday / Saturday expiry. It is quite ludicrous considering the terms of contract state that you can only be called away when your option is ITM at expiry. However, these are the markets we trade in and sometimes rules get implemented in the craziest ways. What also is not available to retail traders is the fact that we can not always sell options due to margin requirements and account constraints. If you are a cash account holder, you are forbidden from selling options. If you want to sell options, you have to have a margin account and then you set yourself up for the Pattern Day Trader regulations. So in reality, when you are an options trader with less than $25,000 in your account, your choices are quite limited in the stock market. You either trade the shares or trade the options carefully. Most of the time, retail traders are stuck buying options. There is absolutely nothing wrong with buying options even if the market is rigged to profit the market makers. You just need to trade the options carefully within the prescribed period of validity. Take for example what our clients did today. I shorted UVXY yesterday, Thursday, at $11 and I covered today, Friday, at $10 netting $1/share in profit. The clients who did not have the buying powder, followed the trade via UVXY $11 Puts. They picked it up for 30 cents per contract. This rose to $1.20 overnight. If you bought 50 contracts for $1,500, you would have made $2,500 overnight. In the end, as with everything in this world, options are not fair. The game is not fair. However, the game is playable and you can beat the cheating market makers if you are prepared. |
Multiple AuthorsTraders from Equity Sense will be writing on this blog on positions and other market-related things. Archives
May 2018
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