The Long Vol - What You Missed This Week

Weird week for the markets and I say that knowing that most consider $2-$3 moves on stocks to be significant - I don’t. The intraday setups worked well and futures were on fire but nothing in the way of sustained trend moves or swing setups.

Names like AMZN 0.00%↑ are close to exhausted and the same goes for MSFT 0.00%↑and the reality is that these moves are not as strong as they were to start this trend higher.

In fact, I am short $SPX/ SPY 0.00%↑ puts and some dated NVDA 0.00%↑ puts after this week as well but I traded around it and Thursday opening drive short on that stock was good for some serious gains.

One of the things I’ll do on moves that, are in my model, extended is short longer duration options then trade around it which just means using short-term options. So, I’ll trade it long and short all while waiting for the larger technical inflection to occur - in this case looking for -15% or more, when and if that happens, I can sell the longer duration puts.

People try to time the market all of the time - that’s why you get people obsessed with back-testing technical and indicators so they get the move exactly right. The fact is this: it’s hard to do that’s why quick opening-drive trades work and why there is a playbook for intraday specific trades.

But in situations like NVDA 0.00%↑ the premium makes sense to be long puts even with a short-term P&L loss because it’s a position that can have the time to be wrong until it’s right and I can trade around it and crush it.

I talked about that opening drive setting up to short Thursday morning it in the Wednesday premium video.

Here is what you missed this week:

• CPI data came in hotter than expected but the markets brushed it off.

• DeltaOne prices officially are changed for 2024 - You can take a trial for 21 days here however.

• There was one new AST Alert in the $100K portfolio.

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AMZN

MSFT

COIN/MARA/RIOT

A lot of the crypto-related stocks sold off well on those ETFs.

There was one problem: The IV on the options chains were too high to trade them directionally.

The shorts were there for the day traders using the equity and that was a proper special situations week for trading in those names (if you used the equity).

If you are not sure how why high IV on those stocks matter or if you’re not making any real money trading options then you can start with the SAT Options Training.

It’s a great primer for directional options trading and a framework to use specifically for high-beta equity options.

That original training was made in 2015 when I took down $350K over 18 months using a $50K account. (it’s documented in there) and it’s been updated for 2024 with new concepts but the same mental model for directional trading.

I’m off to study for my Series 65 this weekend - wish me luck because the last time I took an exam was for the series 7 when I was 20.

Enjoy the weekend.

Dan

P.S.

Trial the Substack - you’ll learn a thing or two that the goobers on TikTok and IG can’t teach you.