Ahhhhhh earnings season is almost upon us. All the stupid traders out there are preparing whatever money they have left to recover the losses on their BTFD trades over the last 4 weeks. Will these traders do anything different? Of course not. Their tweets will go as follows:
#1: AAPL stores look full. I think it'll look good. Buying OTM Calls into earnings. Lotto
#2: AMZN will be awesome. Buying OTM Calls now.
#3: NFLX is awesome. Peeps binge watching everything. $200 stock. Buying DOOM calls.
#4: TWTR has bottomed, definitely can't go wrong here.
#5: GOOGL I like it. Buying Calls here
It's stupid reasoning like so that'll get people in trouble. I don't even know if reality will ever be accepted by the markets at all. How many times have we seen good earnings only to be sold off by the markets because it was 'priced in'?
I am just warning those of you new traders on the dangers of ignoring earnings volatility. You have to smarten up and get better training. IF you're sick and tired of losing money, then click here.
Otherwise, good luck next month!
Crossing the wires: AAPL 105 Oct2 PUTs 7,500
To the uninitiated, that would be meaningless. To those of us who learned about option flow, we'd know about what that means. So let's just say you decided to trade up and got an information service. You're bombarded with so much information - what to do with it? Better yet, do you even understand it?
For some who are too cheap, they'll stick to paying someone $50 / $100 a month for their newsletters with the hopes of understanding the data contained somehow. Now that may work for some but the majority of people who try their hand in the markets will never fully understand the data being disseminated by newswires if they don't take the time to learn the lingo.
Another piece of info: Huge Short Interest on Lumber Liquidators, LL
IF you did not know what short selling is or what that means, how would you use that for your trades? It once again proves a point that as many people avoid trying to learn the basics of trading, they will eventually lose money not knowing proper information.
I'm a huge fan of increasing one's knowledge but it has to be done efficiently and in a manner that makes sense.
I've always hated biotech stocks. You can do the research and you'll see that about 80% of them do not have real income. All they do is prey on people's greed and hope that one day their miracle drug will be approved and be profitable. For the last 5 years, this thesis has worked and countless investors have become millionaires. But underneath the surface, it shows a different story.
20% of biotech companies ever manage to get a drug approved and of the 20%, about 5% really get profitable. BUT the idiots on WS and the analysts keep setting strong BUY ratings for these highly illiquid companies that the sheep keep falling for their lies over and over again.
The biotech short has been a difficult short. It's because so many people keep buying the dips over the last few years. Only now have we really seen a big sell off in big names. We identified the pattern above around 360 and even sent out a premium trade alert to think about that level. Those who took it, though extremely brave, made at least $50 a share after several weeks or $30 a contract via selling $360 Calls and other strategies. It was by no means an easy short because this sector gets bought up so quickly by people expecting BTFD is back.
Will BTFD ever come back? Maybe. But I was never part of that brazen bunch promoting the BTFD theory. But for now, if you've been burned, I hope you'll smarten up and get schooled.
Peace out homies.
Traders from Equity Sense will be writing on this blog on positions and other market-related things.