Good Friday.. Mostly
This was the first year I realized the market is closed on Good Friday.. It s probably a sign from God to stop actively trading so much. But I coudln’t resist, it was an exciting few weeks with some sort of catalyst to trade around. I believe last week we talked about the FOMC meeting and how they probably we’re’t going to cut. And they didn’t. Overall it was a good thing, but still extremely confusing. I hate when people talk about things in black or white. The media does it so much, and everyone always follows. It puts me in a bad head space. I kept asking myself, “are rate cuts good for the market or bad for the market.” One professional will tell you definitely yes and another will tell you definitely no. The real question I should have asked is, “is this rate cute good for my outlook on the SPY for the next week. Every questions needs to be more specific. What are the factors, are you talking about the market or the economy. Are you talking short term, or long term. What size cut, is there other policy at play, which assets will be impacted, what’s the public opinion, what are the professionals thinking, what’s not obvious? Stuff like that. Because without specifics, you can’t build a thesis. Also, sometimes two things can be true at once. It’s hard to determine the exact impact of an FOMC meeting. In this instance there was no cut. Sometimes there is a cut. Sometimes that cut is larger than previous cuts. But this time no action was takent by the feds, and that felt like a good thing. Kind of a hmmm let’s keep moving in this direction speech. Things are not so bad that we need a hike, and there’s not enough defaulting or liquidity issues that we need to cut. So let’s keep pushing forward and reconviene in a few months. That’s basically how the FOMC felt in my eyes.
What did I do during this period.. Well I traded aggressively. Option calls on the SPY, calls on Amazon, even a call on CCL. The theta ate me alive on my SPY calls, Amazon chopped for what felt like two weeks, couldn’t quite get over that 168 mark, and CCL well that one was just a tragedy. They beat all the estimates on earnings day! Woohoo! But they also had a fire on one of the boats, and then the day my option expired a bridge collapsed in Baltimore because a shipping tanker ran straight into it and one of the cruise liners had to reroute which costs them around 10 mil. So yes as you can see, even a good earnings call can be bad. This is why it’s important to manage risk. When my options don’t work out I usually look for more long term plays so I can purchase shares. One of my main strategies is only using profits from trading shares to trade options. Options are the riskier instrument, you should never allocate the core of your portfolio to options. Two stocks I haven’t heard mentioned in a while that were super popular during covid are Pfizer and Dollar General.
To me these look like a bargain. They both seem to have given up just about all their Covid earnings and are flying under the radar. I know they are real companies because I pass by their buildings everyday on the way to work. I see people in the parking lots, and both companies have been around for a while. Seems like a good time to buy.. but what’s the risk? Well the main risk is down another 20% but that’s why I dollar cost average. And there’s always the risk that this trade takes awhile to turn around maybe a few years. Well that’s why I’m buying shares and not options.
