People are starting to accept that we are in difficult economic times, which means lower prices for most stocks.
People who were jumping on board with the bear market rally at the start of the month have had an incredibly difficult week.
As a trader, you should always be learning…
At some point, we’re going back to a bull market, but in 10 years, 15 years, or 20 years down the road, you may see something very similar to what happened this month… And you need to remember how it played out.
The economic landscape was incredibly bad. Inflation, interest rates, supply chains, gross domestic product dropped, and companies like Target (TGT) and DocuSign (DOCU) missed huge on earnings. Then you had several warning signs in the charts, yet the market continued to grind higher.
Do you jump on board with the rally? Or do you keep preparing for the selloff?
Timing markets is challenging… Some people think they can ride the market higher, then switch on a dime when the market crashes. All I can say to that is “good luck.”
This is probably the most difficult trading environment I have seen in my 22-year professional career. The day-to-day action is all over the board, which is why we have taken an approach of finding the longer-term trend and sticking with it.
Things have a way of working themselves out in the end…
I still want to stick with the approach of leaning short, but if we can get a short-term rally, it would be an excellent opportunity to add additional puts.
Let’s get into expiration…
BITO
Nothing to do here. Our original BITO trade, along with our first adjustment, will disappear from the account at the end of the day.
We were bearish on BITO going into our second adjustment but not bearish enough. The stock got crushed over the weekend and jumped over our short strike.
Bitcoin is highly volatile, so let’s see what happens over the next few weeks.
GSG
Commodities tend to do well in inflationary environments, so GSG has traded up and above our covered call.
Nothing to do here. As of right now, GSG will be removed from the account, and for every contract, $190 of profit will be added. This works out to be a 49-day 8% return or 58% annualized.
If GSG falls below $25 by the end of the day, we will hold onto the stock, and sell calls against the position again next month.