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Options This Week:
The second day in a row for a broad market pullback, which wasn't really a surprise coming into this week. These are the days that separate inexperienced and experienced options traders from each other. We have to know when to enter and when not to enter. We also have to know when to take profits and when to cut losses. In 50/50 week where the markets are very choppy, position sizing is key. If you are only working with a small portfolio, maybe a $2000 GOOGL weekly call options isn't the best use of your limited capital. You shouldn't ever put 50%+ into one option, and never have allocated all of your cash for short term options either.
Go in with confidence into the expensive options positions with a plan. Decide in advance what you will cut at and what you will take profits at. Once the trade is executed stick to your plan no matter what. Don't put to much into one position and don't let one position discourage you from continuing. If we remain 70% accurate overall, we will be successful. However, emphasis on the position sizing. There is a big difference between 1 contract of GOOGL and 1 contract of WMT.
My long term holdings took another beating today, for a loss of 3.8%. Bad start to the week, but we are in the middle of earnings season, and the big tech companies are about to report. Shares of Netflix (NFLX) sank 9% in late trading after the company reported first-quarter subscriber growth that sharply missed expectations, suggesting the boost the tech company received while people were at home during the pandemic was rapidly unwinding.
"We've had this fantastic rally ... and I think investors are just pausing right now to digest more fundamentals, more of the earnings releases that are going to start coming out over the next couple weeks." Ryan Nauman, market strategist at Informa Market Intelligence.
This time markets are down, yet the 10 Year Treasury Yield is also down. I'm taking the rest of the week with caution, and don't plan to get into any big positions just incase there is a further pullback. The QQQ is, overall, barely down compared to a the last tech dip, however looking at TQQQ and SOXL they aren't holding their supports very well. Of course, this is the risk of 3X leveraged ETFs. For now, I don't plan to change my strategy to much, but clearly this week is different from the last so I'm adjusting the frequency of attack. This is more of a scalping week for short term options.
Short Term Options to Consider: (remember follow on Twitter for actual trades I'm doing)
WMT 5/7 $142c at $1.40 - (adjusting a little from yesterday) I believe that during the last dip, Walmart fell more than the broader market and has more room to bounce. If considering the incline of the current trend it is on, it can move by a few dollars before Friday.
SPY 4/23 $411p at $2.00 - If markets and tech keep getting pounding, small hedges of SPY puts will work out.
NVDA 4/23 $600p at $6.00 - Broken short term support and could fall back closer to the 50 day MA, ~$555. Position sizing small.
$TIGR 5/21 $20c at $1.40- Hammered so hard yesterday, that we might see a short term correction which would be enough to move the price a few dollars.
Keep in mind that the entry prices will not be same at open. Please watch and adjust for any gap ups or down. Keeping it light today, futures look like they are moving up a little at the time of writing, but anything can happen during earnings season.
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