Trading a Market in News Driven Mode

Last Tuesday (3rd March) I tweeted this image with the words:
“This is a distinct possibility …”

This is a setup that you should already be familiar with and one that we’re seeing a lot of right now.

In terms of the main indices, they almost at the point of testing their lows, and one more surge of nervousness and the pattern will manifest in full with those recent lows being broken.

What you’ll also see in this market review is the number of times this setup has occurred with bearish railroad tracks at the point of retracement, and together with a negative OVI.  This is a beautiful setup and one which illustrates how adaptable the OVI method can be.

The OVI Sentiment Indicator is a longer term indicator, which is why it has been slow to react this time as it had been at high levels for a long time beforehand.  This latest downturn has been short, sharp and almost immediate, giving that indicator little time for its adaptive algorithm to kick in.

Another couple of mentions this week:

MIAMI WORKSHOP 

We are 100% ON for our workshop, and this market is highly constructive for the options strategies we specialize in.

• If you’ve already booked to travel to Miami I’ll be writing to you shortly with our plans and contingency preparations.
• If you’ve booked to attend remotely, we’ll be broadcasting live and recording the event no matter what happens.
• If you haven’t yet booked … do it now and get prepared to maximize your advantage in these wild markets.

Straddle:

One strategy that we’ll see a lot more of this year is the straddle.  This is where you play both sides (bullish and bearish) at the same time, and you profit if the stock price moves enough in either direction.  The key to the strategy is timing and getting good value … and is something that I’ve specialized in for many years.

Consider this … only around 9% of companies right now know what the impact of coronavirus will be on their earnings.

This means there will likely be more earnings surprises than usual in the next two earnings seasons.

That is straddle territory!  

And there’s even more you can do with options … let’s touch on income for a moment … 

Our latest research into the popular bull put income strategy has yielded some good progress.  In stable market situations (which is most of the time) the bull put is a way to create regular income with limited risk.

One thing we know for sure is how valuable the OVI is in improving your odds with the strategy.  More about this in a while, but for now look at the difference between the green line and the red line in the equity curve chart below.  The difference between the two lines is night and day … The green line only includes trading high OVI stocks, and is only active when the OVIsi is green.

So, lots to talk about in the coming weeks!

With options we can keep things ultra simple and still have phenomenal results … But we can also get more creative while still keeping things simple, and make money from volatility, and also create regular streams of income.

Bye for now.