Author: Chris Hood
Be sure to check out new episodes of my video podcast each week, where my ace pupil Brian Jones and I talk the ins and outs of options trading- and give you insights and strategy that you can immediately put to work for you in the markets.
This market is chopping up retail traders like a low-budget horror movie serial killer.
I know because I’m getting messages and calls from many people who are panicking. The up-down market chop is draining retail accounts faster than I’ve seen in a decade.
If you’re one of these people, I want you to take a deep breath and calm down.
Now listen to me.
“If you haven’t been trading for at least 10 years, you’re not prepared to navigate a market like this without coaching. Going long or short without close attention to your signals will leave you broke.”
As true as this statement is of stocks, it’s even more so with options.
We are in a bear market hanging to its current levels by a thread. We’ve seen sharp rallies over the past few weeks, but nothing has changed the downward trend.
In the last few days especially, SPY has been a range-bound washing machine.
Markets like this are a day trader’s dream, but swing traders are suffering.
Buying 3-4 month calls or puts – basically betting on the market direction without careful analysis – is a guaranteed way to lose all your money.
The only strong daily trends to be found are in energy and commodities.
I’ve covered this at length on my YouTube videos, so check those out if you haven’t.
In this type of environment, I would recommend only three strategies if you’d like to have any cash left for the eventual market rebound.
First, emphasize day trading.
I’ve been doing exceptionally well using my system and trading intra-day on the 15-minute chart.
High volatility with lots of daily ups and downs for quick intra-day profits.
But you have to be fast. I like the 15-min chart for these trades, but many traders prefer and even quicker pace. So they work off the 5 or even the 2-min charts.
Personally, that’s a bit out of my comfort zone. Even in my day trading, I’m more like a sedated sloth than a coked-up squirrel.
If you aren’t into day trading or don’t have that skill set, then you could trade LEAPS options. This type of strategy includes options with a year or more to expiration.
Shorting SPY with long puts (because it looks like we may take another nosedive) is an example.
Going long on oil and energy (BNO or XLE) or loading up on agricultural commodities via DBA or DBC also fits this idea.
Remember to plan your trades appropriately if you decide to actually use any of these recommendations.
However, they’re all ideas worth considering.
Finally, you could just stay out of the market.
If you lack the skills to trade intraday or don’t have the patience for LEAPS, sit on the bench and take notes for a while. Then, analyze the market to see how it behaves.
Paper trading can help learn to profit in these markets in the future.
If you’re going to be a long-term trader, this, or something very similar, will happen again.
Stay safe out there.
PS – Dr. Kent Moors’ and his PRISM profits just closed a nice 102% gain on SPFG in less than a month. Nice work finding trades even in this market mess. Find out how they did it right here.