I am going crazy
So today was the first time reading the Es I got more than few points. I was able to take 24 pts out if the market on one trade. That has not happened since before Christmas. Why?
There is no volatility. As an options player vol cuts both ways. Low vol makes options cheaper but it also means they just sort of drift. Or they decay. But they don’t move like normal.
Also, the Fed artificially supported the market saving those banks. That has put a floor for now on the SPX. Also, traders are not long bc they don’t want to buy this stinking pile of shit market bc they see the same things we do: rising food costs, falling CRE, banks struggling, job losses, falling wage growth, consumers record levels of credit. The pros know how this will play out. There is zero doubt in my mind. I want to be short this market. But it keeps levitating and it’s frustrating a lot of people.
So, what to do?
Tightening stops. From 2-3 time periods to 1. Without volatility options prices don’t have the fuel to mov.e. And the natural trend of an option is down, due to time decay.
Taking profits quicker. I’ve had too many positions in the green fail just bc price didn’t have any momo due to no vol. So instead of my normal 100% min target I’ll exit at the first sign of weakness or quiet price action.
Add to my conviction story plays.
Extend my durations. This will soften the decay of my contracts. I probably will start going out 3-4 months now.
Take only perfect setups. I’m used to taking good trades. Now I’ve got to take only great setups.
Reduce swing trade frequency. Related to #5.
What I think will happen
Unfortunately the way this will play out is that we will wake up one day and the market will be down 600-700 pts and then keep going. Right now the market hasn’t decided. The pros are trying to tread water without going long. They are running out of time thought.
Watch this happen: pros get tired of waiting and market keeps dribbling up. They go in and boom, market corrects. It’s going to happen.
Do this now
Now is not the time to be aggressive. Now is the time to prepare and be cautious. I cannot stress how structurally unsound the current market environment is. It IS being manipulated and levitated. With that happening, no one knows when the "rug will be pulled."
Stay alert and be smart. Do not be aggressive.