The market has spent four weeks throwing 100-point moves around like it is nothing, and that should make you nervous.
I was on Schwab Network’s Trading 360 this morning, and I put up three live trades right there on air. But the trades only make sense once you understand the tape underneath them.
This is not a calm market. Over the last month we have seen these giant outsized moves, a hundred points to the downside one day, multiple hundred-point swings the weeks before.
The S&P is just bouncing around the same level it has been stuck at for thirty days, and all that violence is reverberating underneath the surface. When a market moves like that and goes nowhere, it is telling you something.
So I built three trades around exactly what I am seeing.
Two of them lean the same direction.
The third leans the other way, and I will be honest with you, that is the one I least wanted to put on.
It meant stepping directly in front of a name that has been running for a year, up triple digits, trading like a freight train with no brakes.
Everything in your gut tells you not to stand in front of that. I did it anyway, with defined risk, because I think the move is that long in the tooth.
I named all three on air. I gave the direction on each one, the exact spreads, the strikes, the expirations, and what I am risking on every single trade. I am not going to retype any of that here, because you should watch me build them myself and hear why.
One of these three is the trade I have the most conviction on.
It is also the one that scared me the most to put on. Go see if you can tell which.
To your success,
Don Kaufman
