Teachings from a volatile market, June 2022

Posted on: June 10th, 2022
By: Tadeo Martinez

A CPI report came out earlier today on June 10 and although I haven’t checked exactly what it says. I see a big sell-off on the market, especially SPY.

A sold a defined bull spread on SPY, not sure why when the market has been very volatile, but not only that, it has been very bear this whole year.

Now I see why my mentor tells me to not buy weeklies because if someone like this happens, there are more options. Like having more time for the market to re-adjust itself and go back up, or maybe if I would’ve done naked options, have a few more options on what to do.

Questions about alternatives for options

What can I do if I have a bull/bear spread and the price of the stock is not in my favor?

Is there nothing you can do since you’re defining the risk, so you’re also limiting your options? That would make sense, but in this particular case, not favorable for me.

What things should I be aware that are happening in the market? I know for sure the CPI report and the fed meetings, but what are other catalysts that affect how the market responds?

Takeaways for future option trades

I have to be more aware of what’s going on in the market, like the CPI report coming out this month. That was such a huge catalyst in determining how the market might respond, and within that report, there are so many other variables as well.

I’ve been entering option trades that expire within a week, so I’ll start entering option trades that expire further out and take profits when they are about 40% – 50% profitable.

The main thing will be to know how/what to be aware of what’s going on in the market/news. I know there are people that do “headline trading” and do really well. So it’s necessary to have both, an awareness of the market and a technical understanding of the broker software being used.

Steps I’ll take moving forward for trading

The main thing I have to do is write down the different strategies I can do for different scenarios in the market. Because the same strategy won’t always do very well.

Maybe next week, or during the weekend (it’s a Friday today) I’ll write down all the different strategies that we have gone over and in what specific scenario can each be applied.

The most important aspect is knowing when to apply them. So I’ll have to stay up-to-date with the news and what’s going on in the world since things like a war and the economic status in other major countries like China can affect how the market responds here in the US.

Another thing will be to write down a list of stocks that I constantly trade and really understand them. Start to see a pattern in them and although nobody can predict the future, maybe get good at knowing what their next move will be.

Bad but a good trading week

Although I ended negative on my account this week, I think it was overall a positive week in terms of learning. Next week will be much better. I’ve got some work to do this weekend.

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