Yo Pit Crazies,

The consensus among the Financial Twitterati and media talking heads is that we’re heading into a recession in 2023.

Never has a slowdown been so projected by so many folks!

Interest rate-sensitive industries are slowing down from the cascade of free money that poured into them in 2020 and 2021. Other industries are getting back to normal post lockdown.

To me, that sounds like a flatter overall economy with some bounces in between.

That leaves us with the big question when it comes to trading options:

Is it an investment or a trade?

Navigating A Choppy Market Takes Tools

The big difference between an option investment and an option trade is what to do at delivery time.

That means when the option expires what are you going to do?

Take the underlying or not?

If your trade idea requires taking delivery of the underlying, it usually is an investment.

Short-term option trading is usually three months and less for duration. Time is usually a big factor in how the long or short option performs. Time affects option prices in the short term quite a bit, but is much less important six to nine months out. Those long term options want a power move in a direction for an extended period of time. That is much harder to get in the short term.

In the short term, I want to see that an option has a good chance to win.

That brings us to Edge Hunter.

Below is a snap of SPDR Energy Producers and Explorer ETF (Ticker: XOP).

I do like energy to make a recovery, but short term the option prices are just fair or over priced.

There is not enough for a short term trade as traders are keeping premiums in XOP relatively high.  A lot of that might be from the CPI number coming in this week, but in XOP I will take a pass on buying short term options.

Learn to evaluate the conditions before putting a trade on.

Or have someone make it easy for you.

To Your Trading Success,

AG