How I’m Staying Calm While Volatility Reigns

by Options Sensei

Volatility has always been a two-way street; offering both opportunities and risks. The one that you choose will largely dictate your approach, and whether you ultimately profit or lose during periods of increased volatility. 

Unfortunately, most people tend to accentuate one or the other when things get dicey; pushing more chips on the table to take advantage of “price distortions.” 

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For me, I tend to take the middle road with the regime change having us stuck, where the major indices such as SPDR S&P 500 (SPY) and Powershares Nasdaq 100 (QQQ) often grinded higher for months at a time. 

What made trading particularly hard was the dichotomy between big-cap tech — still only some 7% from all-time highs — and the absolute destruction of what was occurring below the service.  The stocks that never should have received the valuation they did at the peak of the speculative bubble in 2021 have now popped. Do they have further to go?  Maybe. 

Here are just one of many illustrations of the dispersion between big-cap tech and all the dreck. 

nasdaq stock chart 200 day moving average

One thing I do know is that I’m glad I didn’t get caught up in FOMO.  I instead chose to be a HIMI or (Happy I Missed It) trader. 

This allowed me to be selective and nimble in picking opportunities, whether it was bottom ticking a Roblox (RBLX) trade, taking some short positions such as United Parcel (UPS), or picking away at old economy names like Deere (DE).  

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The Options360 Concierge Trading Service has started the year with 5 out 5 winning trades, up 7.8%, compared to the SPY, which is down 4.6%.  That is the type of Alpha or outperformance you can expect, which has been displayed by Options360 year after year. 

We wait for good set-ups, apply the appropriate strategy, and don’t overstay our welcome.  Solid winners in the 45-65% gain over a couple of days get booked. Losses get managed.  Realistic expectations and a calm rational approach are the order of the day. 

We all know retail traders became a major market force from 2020-2021. Their participation neared euphoria as indiscriminate speculation on the “new, new thing” was hypercharged with YOLO call buying.  

The flow of funds was unprecedented.

inflow to equities stock chart

Now, the latest data suggest over the past week $1.7 billion was withdrawn from tech-oriented funds and ETFs.  Buy high and sell low is not a success recipe. 

A few weeks ago, I identified that old economy stocks would have their revenge.   They did and we took the profits. 

The field is now reset and I’m taking a clear and calming approach to finding the best opportunities. Likewise… 

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