Issue 88: L’OLLI puts & KiSS calls - Masters in Trading Digest

L’OLLI puts & KiSS calls

“If You’re Doing What Everyone Else is Doing, You’re Doing it Wrong” – Casey Neistat

At Masters in Trading, we believe creative traders win. It’s a message we preach daily to our community. What does it mean for traders to be creative in the market?

It can mean many different things, but overall we want traders to think outside-the-box and not get stuck feeling helpless when positions go against them.

This is best explained through an example.

Here are the three biggest takeaways:

  1. Creative traders win. Do what others are not doing
  2. Ten traders taking the same trade will always result in 10 different results
  3. Do not quit on well-planned trades

OLLI TRADE PROTECTED WITH A KSS

Trade Idea Shared in Discord – July 7th, 2022 – 9:34 AM
Buy July OLLI puts for 1.05.
Risk $105, holding period = 8 days.

Above is a chart of OLLI going back 2 years. Notice how OLLI trades right up to the green line? That green line is the top of the “expected move” for OLLI.  

The expected move often serves as resistance when stocks rally and support when stocks fall.  For those familiar with options, the expected move is also the outside bands of the at-the-money straddle.

One Day Later…

The $65 puts that had been trading for $1.05 are now trading for $.30. That’s a 70% loss in less than a week!

Above is the Options tree for the next day after sharing the OLLI trade idea.  This stinks, so let me see who needs help.

JR Discord Post: July 8th, 2022 – 9:26 AM
Who’s in OLLI? How can I help?  Don’t sit quietly, frustrated, confused – we are here to help! Talk to me!

I posted the message above because I was concerned that folks in the trade might do something silly like stop themselves out.

When you buy options, you have the luxury of knowing your exact risk before you enter the trade. Giving up on a trade one day after because the price goes against you (to me) is not a strong reason to exit a trade.

Generally, what we see from everyday traders is an unwillingness to be patient and allow a position time to work.

Here’s why we say “creative traders win …”

The puts we bought in OLLI were trading against us quickly. I want to share an idea that could make those profits back quick so I pulled up the Wall Street Wiretapper and found a highly correlated stock to OLLI.

Found one, Bingo!  

KSS is highly correlated with OLLI, but that relationship has recently broken down which is perfect to protect the run-up in OLLI.

JR Discord Post: July 8th, 2022 – 9:34 AM
Hedging Trade for OLLI – Consider Buying Short Term KSS call options – 29 strike for .55 or 29.5 strike for .43. 

The Options members liked having a plan to protect this trade and within 2 days, not only were those OLLI losses covered, members had some extra profits with the strong rally in KSS.

You can read them celebrating below.

That’s what we mean by “creative traders win” – we found protection in KSS but that’s not the only way to protect this position. What matters is a willingness to go out and find protection for the benefit of your account.

Jonathan Rose, Stacy Brovitz, Pablo Lucena are active in our Discord community throughout the week, helping members with their most pressing questions.

To your success!

Masters in Trading Digest - Issue 88

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FINAL THOUGHTS

WHAT TO EXPECT IN THE NEXT MIT DIGEST

The next issue will be released on Friday. 

Until then, trade smart and always manage your tail risk.

Thanks for reading,
Jonathan Rose

P.S. Having a case of “FOMO”? Memberships start at $147/month.
Now is the perfect time to try something a little more creative!

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