Defending My Big Position in Facebook
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Defending My Big Position in Facebook

John F. Carter - March 24, 2016

Hey everybody, this is John, and welcome to the free video. What's interesting, a lot of people today, you know, all the bearishness kind of came out. Like, oh my God, this market is topping, it's ready to die. etc., etc. We've heard this before, and I'm a closet bear, but at the same time, you know, hey, this is a bottoming pattern, we're kind of rallying here.

On Apple, which is the biggest stock on the NASDAQ, and you can see, of course, the QQQs have come up. And so the question is, are there things that we want to look for? Like, is Thursday gonna be like this massive down day that we need to be careful of? Or is it a short trap? At some point, we're obviously gonna roll over and die, but, you know, is it tomorrow?

So one of the main things I'm cautious of, at least at this point, is the TRIN. The TRIN closed over two and as a rule, when the TRIN closes near two or over two, 8 times out of 10, we rally the next day. So if we look here, it was near, right? And we had, it's like, we did close a little bit up. Here it was near, after a big sell-off and then we had a big rally the next day. Here, you can see that was one of the times where it didn't. Again, 8 times out of 10, right? When it doesn't, it actually usually turns into something a little bit nastier. But again, we want to play the probabilities. So that is the kind of stuff that we're looking at. So what else?

The put/call ratio today closed over one. Now, I'm not so keen on where it closes, I'm actually more keen on the 10 day moving average. But the fact of the matter is, is that the put/call ratio is over one. That means there's a lot of people making bets that the market is gonna fall. Okay? And you know, when the moving average moves over one, that means everybody and their mother is short, and the market just rallies, because there's no one else left to sell.

Again, this is one of those markets where it's very strange, because everybody, I mean literally everybody, is expecting this market to fall. By the way, Autozone is awesome, but it smells more like a short trap. As a trader, do I believe this rally? No. Do I think that this rally at some point of going to fail miserably? Yes. But do I think it's gonna happen tomorrow, or do I think it's going to happen on Monday? And that's really the key. Do you want to be right, or do you want to make money? And I would rather make money than be right. So, yes. at some point I want to short, but I'm not getting any signals, so what do I do? A big part of managing this kind of stuff is, like, if you're in a trade and the markets are a little hot, you've got to know how to kind of defend your trades. Right?

So here's one trade I'm in, Facebook. Even today, the NASDAQ was soft, but Facebook was fine, and I have some call options, 37 days out. Why 37 days out? Because that's when I'm having earnings. You can see the kick in implied volatility. So I wanted to try to buy these options now, before the implied volatility got too high, and ideally I get to hold it for a couple of weeks or more, and the price rallies while the implied volatility increases. So the question around something like that is that, well, what happens if it's a little soft? I mean, I've got, you know, $60,000, a hundred contracts, put into this trade. I have no intention of losing $60,000.

So part of the question is, what happens if the market gets crappy and Facebook starts to fall? At some point, I want to have a stop loss. But sometimes, instead of getting ... if you've ever gotten stopped out, and then the market does exactly what you think it's supposed to, well, that actually happens quite a bit. So if you know how to defend your trades, then you won't get shaken out of them, and you can still make money, even if it initially turns into a loser. So how do you do that?

Where I learned how to defend trades, it's actually a question that I get quite a bit. How do I make adjustments? How I defend this? I mean, I can show you, but I actually learned all this stuff from Bruce. By the way, I don't know if you guys know, I mean, he spent 20 years trading options at a hedge fund. He knows how to protect his risk better than anyone I've ever known, and he's really good at consistency. I'm, like, hey, here's a setup, we're gonna turn this into a big trade. I mean, I'm the guy for that. But while we're waiting for that to setup, we need to know how to defend and protect ourselves from the crap that we're seeing this market. And that's what I've learned from Bruce.

So he's doing a three-part series here. March 29th April 5th, April 12, because there's a lot of information here. Each one will be scheduled from 6 pm to 9 pm Central. It's a three-part course. You can purchase each one. My thought is, well, if you're going to learn defense, learn defense. It's the best investment you can make in your trading career.

So in this course, Bruce is gonna talk about how to salvage a trade that's already blown up in your face, which is awesome. How to identify a trade that is save-able, or just close it out. This is really crucial, because a lot of times, I get a lot of emails and calls from people that, they're well beyond the point at which they could defend their trades. You've got to know when you need to apply that defense. All right? Methods to retrain your brain with defense in mind. A lot of times, we get in, and just think of how much money we're gonna make. But if you can defend it and hold through the wiggles, you can still get to your end goal. How to defend long options, debit spreads, credit spreads, diagonals, butterflies, calendars, iron condors. In other words, if you trade options, and you want to learn how to salvage your trades, this is the course. And of course, a little bit on psychology.

So if you want to do the three-part course, it's $497, but if you just want to do one part of it, and just kind of get a flavor of it, that's fine, too. If you scroll down, you'll see that you can do each one separately. So if you want part 1, $197. Part 2, $197. Part 3, $197. My thought is, you do you know all three, which if you scroll up there, you'll see it. You can certainly just do one. Here, he talks about defending long options, debit spreads and diagonals. Completely worth the money for that one class. Then part 2, you kind of step it up. Defending credit spreads, iron condors, iron flies. And part 3, let's defend broken wing butterflies, short-term calendars, and long-term calendars. So if all you do is long options, buy calls and buy puts, you just do this. If you do all these strategies, do them all.

All right, hope that helps, you guys have a good night, and we'll see you at the next update.