BY ANDREW GIOVINAZZI
February 12, 2024
Yo Pit Crazies,
The Option Pit Event in Chicago is coming in July. I have to leave Maine for a week in July and this is the only reason I do. So get to Chicago and see the Rock Lobster out of his natural habitat.
Did you know that every other market top was unknown territory? Every other investor in history had the same problem. Is this the top? If I buy at the top, am I a dunce? After doing this for 30 years, my guess is 90% of market action is psychology and 10% is the fundamentals. If I am buying stocks when I want to hide under my desk, I know I am doing the right thing. If I sell stocks I own when I don’t understand why people are buying them I am doing the right thing.
Investing is not trading. Investing, I want 10%+ gains in a year on a portfolio. Trading I want 10% or more in a few days and if I can do that consistently I get 50% gains on the account or more. Witness performance in the Easy Trade Button, Trading Desk or OP Mentoring. 2023 was extraordinary but not unheard of coming off a 25% down year the year before. Tech was dead with inflation and higher interest rates but Big Tech has scale and does not need to borrow money. There might be a reason for the bounce when some companies grew earnings when no one thought that possible.
Here is a simple tip to help with trading and controlling the mind. What I have found is that most trading needs a pressure relief valve. There is a video goody if you click through.
Let’s see what that is.
Leaning on a position is a floor trader trick
The first thing to understand is there is a way out. That is what leaning is. A trade to give myself flat market exposure if I need it. For instance I thought the Market Vectors Semiconductor Index (Ticker: SMH) was going to fade Friday so I bought a put calendar. But in case I was wrong I gave myself an upside alert to buy a call and get long and complete the strangle. The big thesis was to buy strangles through the Nvidia Corp (Ticker: NVDA) week after next and see where they go. I wanted a better entry to get a cheaper call but I think SMH has no top right now.
SMH 1 day performance
SMH did not fall apart. I executed my call and ended up just green on the trade for the day.
I was able to take a short position because I knew I would take a long position at some point.
Big mind relief when the market did not do what I wanted short term.
Now time to ride my strangle and if I am up 10% or more in a couple of days I close and move on.
The potential for SMH to keep going is nuts but that is not my concern for this trade. It just needs to go somewhere.
Option Pit has 100’s of trading techniques that help make better traders. Check them out in OP Mentoring or any of our extensive, daily trading services like Trading Desk or Pro.
To Your Trading Success,
-AG
Andrew Giovinazzi
30-Year Trading Pro
See what's hot at option pit
CAPITOL GAINS: SMR Aug16 7 call closed for a 150% gain
DELTA STRIKE: VLY Mar15 8 puts closed for a 88% gain
PFE May17 26 calls closed for a 66% win
OP MENTORING: SPY Mar22/19 510 put calendars and 520 calls for 6.4% gain
OPTION SHOPPER: ERX Mar28 65 calls closed for a 90% gain