Boy how the time flies. JP emailed me last night, giving me a little bit of a hard time for being absent so long with no explanation, and rightly so I suppose as I have been away from here for quite some time.
I had taken a couple trades and had them blow up, then implied volatility shot up on most options due to the little squall we have been seeing in markets since February kicked off the fun. This combination of events was all the sign I need to close up shop and go on a little vacation with Mrs. Merlin.
I came back in March expecting things to get better fairly shortly after my return and was charting things out when I realized the structure on markets was not so hot and indeed looked like sitting it out was the best course.
Apologies for not coming on the site and making these things known to you real time. In the future I will be quicker to jump on here and let you know my thoughts.
As stated above, Volatility has jumped, which means options become more expensive and thus the profit margin is significantly lower, making options trading much less appealing.
During times of extreme market moves the best thing to do to capture the best gains from my experience is to trade futures contracts from the edges. Meaning when markets are making a new low that looks like a good spot for potential support you buy there and put a stop at a predetermined level below, as well as decide where you will take profit.
This gets tricky as well and the high volatility and wild swings is not for everyone. Only the most experienced and professional market participants should trade futures contracts. There is an old saying about this “Trading options you can lose the rent, trading futures you can lose the house.” This is not a hyperbole. Be extremely sure you know what you are doing before you attempt any futures trades. If you have access to a paper trading account that can trade futures contracts I would highly recommend that you start there before putting any money in the trade.
As for the markets here, I read what “Hightimer” said here last week and from my analysis it looks to be correct that markets have done exactly what they should to put in a low down here. This is very tentative of course and needs to be closely monitored daily in my humble opinion.
In summary I would say the need to stay cautious is still relatively high, but I am starting to do some shopping here and will update you on any purchases I make.
See ya all later and trade em well!