Anyone shorting the S+P by 5% for July 22?

Just getting into options. Anyone shorting SPY by 5% or more til July 22nd?

 

I would if I knew what that was and how to do it.

 

Why short it now ?

Remember - predicting things based on past results rarely is a successful strategy.

This isn’t betting - it’s investing. In betting - there’s an old saying “you bet into streaks or you stay on the sidelines” - because betting involves humans and humans have emotions and it shows.

Stock investing is completely automated these days - yes, a human enters the formulas in - but the computer does the work. It trades thousands of times a day - buying and selling for fractions of a cent gains sometimes - but in the end repeat a fractional cent gain on a stock 1000 times a day over a hundred thousand shares and you will get rich.

The market is no different than a roulette wheel - if 29 came up 8 times in a row - either the wheel is fixed or as long as it is there’s a 35 in 36 chance (or 34/35 chance on a euro wheel) that 29 will not hit next spin.

I think the market remains flat to slightly positive the rest of the year. Yes - there are a number of bad data points potentially yet to come - but we dropped 30% in 6 months. Another 5% isn’t likely as the sellers have sold and the bargain hunters are already picking through the carnage.

Now if your thinking 5% off a sector like energy - I wouldn’t say you couldn’t be right. For the record I’m overweight energy and have been for a while - liked the high dividend it was paying and relative security when value stuff wasn’t as cheap as it’s traditionally been. Now though I’m a solid hold with occasionally nibbling at Nat Gas names on drops as well as a bit of CVX and XOM.

Consumer names and staples though will not be down 5% - the flight to safety will ensure that. Tech may well drop 5% - but just as likely it rallies 5% (or more). Look at the last market to drop this much in a 6 month period and what it did the next 6 months. Look at what markets did in the early 70s and their performance overall. Dips will happen and will be followed by slight recoveries and lulls before booms.

The uncertainty makes companies run leaner and leaner run companies produce better results overall. At some point that outperformance will reflect in stock prices.

…or you can just throw a dart and dump it all on that stock. As long as your not buying some digital currency that didn’t exist pre y2k - you should be fine financially no matter what way you go.

 

As someone who in a previous life held a Series 7, 63, and several certifications, I would advise staying away from options. That said, your $$ and bon chance. I have seen people basically wiped out due to options trading. The problem is you don't have the information needed to consistently successfully trade options.

 

Good advice above - options are fine as PART of an overall strategy - but like any leveraged investment - your condensing risk/reward.

I’m sure OP isn’t thinking of tossing their retirement into a big options play - but always a good reminder for people to remember to never put more than a small percentage into plays like this.

 

Yeah, and I meant to mention that as well - tread lightly and have fun, but don't expect a lot out of it and don't let a win convince you to get in over your head.

My strategy is just no options. There are plenty of sure things out there when maintaining a balanced portfolio and playing the long game. Most extremely active traders aren't making a lot of $$ unless they are insiders. Some people like to treat it like the races and chase that instant payoff.. I understand this kind of high, but prefer to get my fix at the poker table.

 

Ok, for the negative 5% thesis - I figured that quite a few companies had a way to go down before they were at a 17X or better. Also I think the jobs report will be stronger than they think and because of that the Fed will definitely raise by 75 points and the speculation for Sept will be a big rate hike instead of easing.

Lastly concerning the tech comment - I believe the chips act will pass at the last min and bolster the semiconductor market. I think it can bounce back some based on that news. Specifically Intel and GFS.

Trading options is kinda scary, but the rewards are nice. I don't mind gambling some but I'm still trying to figure out what a "dumb" bet looks like.

Edit - 401k hasn't been and won't be touched. This is all non retirement money. Options is just me learning something new. This portfolio I just started is planned to be stocks, just have friends who trade options and I was intrigued.

 

Couple of thoughts now that China is out of lock down and focused on projecting strength and economic growth.

If a Chinese war with Taiwan broke out:

China invades Taiwan and the chip values will go through the roof due to Taiwan comprising 90% of the chip market. Every day China waits, the US makes small steps to mitigate this risk.https://www.economist.com/asia/2022/05/26/taiwan-is-worried-about-the-security-of-its-chip-industry

I had recently heard that China (Wuhan) controls the global antibiotics supply chain and just flexed that leverage recently.
https://www.google.com/amp/s/www.ma...ebuild-its-manufacturing-capacity-11619640612

 

Shorting is crazy, CRAZY risky.

 

Yes - but no crazier than making leveraged short term bets on a spike.

Technically of course there is a “known end point of losses” when betting on a stock to go up (absolute 0 - you lose the investment) - but shorting the potential loss is whatever the available supply of money in the market - assuming everyone everywhere bids whatever they have for a piece of the market and no one wants to sell.

Of course either scenario would likely result in much bigger financial ripples than the ruination of a single investor. But plenty of rkeduktd in the middle point that crush a small investor and don’t set off a worldwide financial crush or spark a world war.

It’s funny to me though / people who short the market are treated differently than those who feel it will rise. Kinda like playing don’t pass line on the craps table. Everyone is cheering for a similar result of the shooter to pass or make his point - and usually one player quietly hoping their don’t pass wager is a winner. The pass line crowd is loud and boisterous - and usually all console each other when the shooter craps out reminding each other they were “almost over that hump and in for a big payday” while the don’t pass player quietly walks to the cage to cash out.

The odds of a 5% drop are EQUAL to a 5% spike - but brokers make money on rising stocks only - or at least more. Difference in the stock market though - instead of standing by silently like the don’t pass player - brokers are wildly yelling for you to “get in the game and bet on a rally” while betting against you on a drop. Market goes up / they win with bigger commissions and trading fees - market goes down there shorts pay off handsomely - market does nothing but dip and pop - they make money. Notice a trend here ??

Stocks are still the best way to grow money for the average person - they are liquid, easily tradeable and represent an opportunity for ownership to the everyman. At the same time - realize you will always be swimming upstream betting into a market - sometimes the current doesn’t seem as strong / but it’s always an upstream swim.

 

To your point watching CNBC Business channel I feel like the narrative is far more "buy, buy, buy!!!" Then hold cash, short, or dollar cost average.

Every once in a while someone will share those options and it's almost an uncomfortable pause or unacknowledgement by the host.

Just recently a CEO stated in a conversation at one of the CNBC interviews from the Aspen Summit that they had and continue to stack large amounts of cash on the side and the female did a literal double take. I chuckled pretty hard at that one.

I thought most wealthy traders only made a few moves a year and almost every big player in the game bought their stocks through an options trade.

 

Should of shorted it on Friday. Hindsight....

 

And I should have been taking those bets right up until around Noon today…hindsight indeed.

Just when you think we are headed back to 3400 a a funny thing happens and we rally for a slight gain on the day after being down like 2.5% on the day.

A lot of money made today and to those who didn’t dump positions into the downward start - a lot of losses not sustained.

Get ready - you are going to see this for the next few months I fear - hopefully with lower drops and higher recoveries - but definitely going to be turbulent. Now might be the time to start investing in the VIX - at least to protect your positions and sanity.

Energy was a loser for me today - I’ve started to unwind positions a little while I can still make a profit on them. Taking it slow though - no doubt something is going to push oil back to the 1teens soon enough. Simple fact is no one’s drilling anything they don’t already own - cost of capital is going to remain high for exploration companies and they got burned big the last few years.

Funny how we heard about nat gas at stupid high levels and even now it’s well above the profitable price - but none of these Utica drillers are starting much of anything new. A few widening proven fields they own - but no one is ready to go wildcatting (yet).

Landman from Ascent told me they were set and could remain profitable in Ohio at 2.40 or so - this was 18 months or so ago when price was right at that mark. Said at $2 there would be cutbacks/layoffs - but he wasn’t worried. Should have asked him what happens at $6 - never thought to as no one would have predicted this. Latest leases I’ve seen have been in the 3 year/$1500 signing bonus and 15% net profit range - and people are happy to accept after a 4 year period of no offers. A decade ago land groups were demanding (and getting) 10k/5 year and 18-20% GROSS without deductions at the tail end of the great land grab.

 

You think we are swinging in an upwards trend? I get the feeling tech really wants to declare the recession over.

Oil makes zero sense to me. Nothing changed and the current gov's policy with Russia is widely known an unenforceable. Not to mention a certain someone is sending clueless tweets to gas station owners to lower their prices.... Yet selling gas is a break even business model for most. Coke and chips is where their profit margins lie.

I need to invest in a crystal ball. Or just make long term smart plays and stop the day to day speculation.

 

I heard the guy on CNBC talking that about stations making nothing on gas.

Technically he’s not “wrong” when your talking mom and pop convenience stores - they buy the gas off a distributor and mark it up 3% - you pay at pump with a credit card and it cost them 2.9% to sell said gas. Figure .1% evaporation out of the tank and loss for drive offs - yea - they literally sell gas to attract foot traffic hoping to sell you a 1.29 candy bar that cost them 58 cents.

The big chains though / they are either owned by the refiner (Marathon for example) or have the ability to place bets using speculative futures or negotiate better pricing with a distributor. Mom and pop selling 2500 gallons a week don’t have the ability to flex any muscle outside of being part of a cooperative of store owners. The chain of 50 stores selling 100k a week though - they have power to squeeze a few cents.

 

Yeah I heard him too. He said Coke and Tobacco but I didnt think Tobacco 'was very profitable anymore.

Learned about gas station revenue back in my early 20s. I remember being flabbergasted when learning the business model.

 

Worked for a "big chain" and saw the fuel books. The biggest profit on a gallon of gas/diesel at our interstate truck stop was a nickel. Most of the time it was 2-3 cents per gallon profit. Even the chains make their actual profits off the in store sales, especially their deli/hot case items. If you could make a killing on volume fuel selling there would be tons of fully automated fuel stops with no stores out there raking in the money with little to no employee overhead. Gas stations making money off fuel sales is a myth and only pushed by those with an agenda to divert attention.

 

Tobacco isn't that always the most profitable and is a bit risky; as in it's highly scrutinized, people try to outlaw it and there are some long periods of downtime. But at the same time it's not going away, millions of people are going to continue buying and using it regardless of price, and it pays a nice dividend. Just take a look at Altria (MO) or Philip Morris (PM) and run the graph out 10 years.

 

Bottom line tobacco is not “profitable” on a cost/resale basis. Kinda like fuel - you don’t make a high percentage - but a tiny percentage of a hundred dollar bill is better than 30% of a 5 dollar bill.

You make 6-8% on tobacco - BUT there are manufacture sponsored programs/rebates - not as good as the days pre master settlement agreement - but still plenty valuable to high traffic operators. The higher the traffic count and the more you sell - you can easily qualify for more in monthly payments than you make on the actual product.

For that matter - candy/snack companies do the same thing. Just like grocery stores get paid for prime placement - Hershey and MARS pay for that candy rack right in front of the register. It’s all about exposure. Coke/Pepsi never paid me - but I’m sure they did bigger stores - but they did offer plenty of “reduced” price or free product to dedicate a shelf or 2 to their latest sugar water offering.

 

I will say Coca Cola has been one of my more solid investments. I hasn’t gone up or down, but it’s a nice drip. And it probably isn’t going to go anywhere because 1) soda is one of the cheapest sources of calories there is 2) people will always like the taste of soda and 3) there are minimal foodborn safety risks associated (think chipotle stock).

 

I agree as it applies to the short-term which is more in line with the subject of this thread (derivatives and short-selling) but as part of a long-term strategy it can be profitable.

 

The market this week is nuts. Up is down. Recession is a positive, low unemployment is a negative, oil is king on Tuesday, trash on Wednesday.

Tech stocks are trying to buck the system based on "value" and crypto cycling through one bankruptcy or buy out every few days it seems.

 

Well my trash pickup is on Thursday this week cuz of the long weekend.
But yes, things have been crazy. I am waiting to see what happens with 2nd quarter earnings. I think after next rate hike, earnings will be adjusted down because of inflation, and will also be lower in general. I'm hoping that will be the last big dip. That's purely my speculation, and we will see what happens. But that's where options come into play for me. Covered calls and protective puts are the extent that I'm comfortable with.

 

After this week's rally I don't know what to think. Everything can't be up at the same time can it?

 

Just a relief bounce. We are technically in a recession now. Historically the VIX needs to get over 45 for the bottom to be in. Last two recessions the SPY went down roughly 55%. Not saying we will absolutely see the 200’s, but I don’t think the bottom is in yet. I don’t remember the targets off the top of my head. But doing a fib retracement will get you in the ballpark.

 

Volume has also been super light, we may hit the 390’s but I think we go back down.

 

Just shorted SPY to Aug 5th.

 

Sold my short for 100% profit.

 

Well - as of today 7/25 looking at approx a 5% INCREASE for July on the S&P.

Will not shock me that we wind up July at flat even or a gain of under 1%.

The worst isn’t over - but we are also not bound for 3k - we will see a slow for rest of the year I feel - picking up steam mid November and until year end. As of today we are YTD just a tad over 16% negative - I can see this leveling out in the 5-8% range before year end.

Short term anything can happen - but as you expand horizons it still is a good time to invest - carefully. Pick good companies and buy when they dip.

Whirlpool just announced and best - looks like a nice place to park some cash for a while. 4% dividend - will benefit as steel cost and chips come down in price but consumers begin to accept the higher pricing points. Won’t double - but 10% bounce from here till year might not be too unrealistic.

Energy is gaining steam again - but I’m already overweight the sector and can’t justify taking on too much more. CVX EQT ANR and RRC are my faves. Yea t your getting in / wait for the drop - something will convince the market that $8 nat gas won’t last - but news flash - we don’t need $8 to be profitable - just more access ti markets and $6 will be great for producers.

 

I have quite a bit in some calls for XLE.