Trading Update June 11th
Folks, after such extensive trends in one direction the market must go into consolidation mode to figure out the next big picture move. Whether we see a push back to fresh all time highs or the beginning of a bear market, nobody will know anything until the consolidation period is over. The key things to note during these periods is the lack of overall direction and the subsequent lack of follow through. This means that holding a put or call for a lengthy span of time will most likely result in a hefty loser. The strategy you want to focus on when markets go into chop mode, is writing credit spreads.
Most stocks ended the day squarely in the red as the broad indexes dipped close to their lows on the session. Keep in mind during the morning the indexes almost filled the premarket gap area. Smart money is pushing traders into both sides of the trade and screwing everybody. It also feels like the intent is to pile traders in on the long side and then pull the rug out from underneath them. I managed to keep myself away from the trigger today much to my surprise.
This really proves that you can’t fight the market sometimes and if you’re going after higher prices on your options, then you need the market to support your move. Take this Amazon (NASDAQ: AMZN) for instance…
This name has been held under $272 for quite some time now and on Friday chose to break out over that resistance level. Call options skyrocketed in value through Monday’s close and it looked as if the trend would continue into today’s trading session. Unfortunately, with the choppy action we’re experiencing, the indexes cut this move short. Take a look at this weekly call many of us here at Sanglucci.com chose to play yesterday.
As you can see above, if you didn’t take your profits before the close yesterday, then you lost a majority of that premium gain and possibly even went negative on your trade. This is where a trader must understand the sentiment of the current environment. This is where a trader must use the appropriate strategy for the terrain he is exposed to.
Stick with Lucci and make sure to register for our webinar tomorrow evening after the close!
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.