Trade The Journey

Trade The Journey

Confused, I am too!

Maybe confused isn’t the word, “perplexed” sounds better.

The world continues to battle with the Coronavirus. Here in the United States, the President remained defiant to medical experts and recommendations. He boasted that the Virus was overblown and a possible hoax.

According to reports, he has contracted the Virus and was moved to a medical center for monitoring.

Some say its karma, some pray, and others have kept their opinion to themselves. Unfortunately, no one knows the recent news reports’ accuracy regarding the President’s health, and the President’s physician has contradicted earlier statements of troubling vital signs.

So we wait. How will he emerge? Humbled or supremely confident that the Virus poses no more of a threat than the flu?

Most stocks gapped down on the opening due to the overnight news regarding the President’s diagnosis. Here’s where the question of profitability versus conscience comes into play.

One way to buy the expected volatility in the coming months is to purchase a VIX future. These instruments are for experienced traders and investors. Numerous variables affect the VIX futures profitability.

The VIX is known as the fear index. It represents expected volatility in the next 30 days on the S&P 500.

VIX futures reflect the market’s estimate of the value of the VIX Index on various expiration dates in the future.

Buying a short-term VIX future ETF seemed like the perfect play. I thought that the news of hospitalization would rock the markets, but it didn’t. The ETF moved up a bit but not much.

So much for an easy payday. I’m sure there’s a trader somewhere who understood the right position to open and close in response to the news announcement. There’s always someone aware of a development that others are yet to know.

 

I believe they also call that insider trading.

The skill I speak of has little to do with insider trading. The best practitioners believe that the market generates enough information for skilled observers. It takes many years to build this skill, but the reward is worth the effort.

 


Revisiting the question above, I wonder where profit and conscience separate? Is it okay to profit from the downfall or challenges of others?

Well, maybe that’s not the right perspective to hold on this non-contact sport. There is a profit to be made and its unamerican to not make a profit where there is one to be made. Capitalism at its finest. 

Maybe I think too deeply about things that don’t matter. For sentiment to change drastically on a stock, an extreme event occurred. If the stock headed downward, in a lot of cases jobs are lost.

Such is life.


The VIX future was a play on market uncertainty. As we near the election, we should expect the unexpected. There are many uncertainties, both domestically and abroad.

Businesses have begun laying off employees to what many fear will be permanent unemployment. Precautions taken to stop the spread of the Virus has also increased our reliance on technology. Due to technology, a transition is occurring, transforming the workforce from employable to becoming structurally unemployed.

All of this means that stimulus is needed now and possibly in the future on an ongoing basis. It’s hard to tell what will cause market participants to shun their notion of a quick recovery with all that’s happened. Participants seeing a dip may be inspired to buy, seeing that March’s downturn led to profits.

With the ease of trading, many view the stock as a cash machine. Every other Instagram post is an advertisement that displays the ease of profits made trading options and opening large stock positions. One post showed someone who had 24 contracts opened. I can’t imagine the risks involved in taking those kinds of positions.

Looking for a quick profit usually leads to ruin.

Exuberance preceded the great depression. In fact, before the collapse, many Americans were participating in the stock market for the first time. Many traded on borrowed money because they thought the good times would never end. No one wanted to miss out on the stock market’s unbelievable rise, which eventually led to a stock market collapse. The economy followed soon after because the stock market is an indicator of future economic conditions.

When it all boils down, everything is based on sentiment, how people feel and think about the current and future state of events. When people invest, they are looking ahead. What are the market conditions moving forward?

The problem now is no one knows how everything will play out. Before, we had a general idea of what to expect before and after the election. We expect the advertisements, debates, and occasional news leaks before the election and an orderly transition of power after the election.

But Now:

“Anything can happen.”

We must trade and invest with this mindset. With that being said, I have to accept that its okay to be confused.

An open mind is essential to your success.


This past week:

This past week I faced a cash crunch. It takes some time for your money to be returned from some of the financial apps. By taking close to three days to process a request for your money to be returned, it dissuades me from making a request.

But this time I needed the money. Bills are still due regardless of your financial dilemma. Next week, I expect more of the same, a sign of the times.

This past week I will give myself a grade of “C” for maintaining.

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