Yesterday afternoon I waited for the expected move to align. This morning I had two winners before most people finished their coffee. The math is not complicated.
| | | 400,000 SPX contracts traded before the cash open this morning. | You think the volatility is over? Look at that number and tell me with a straight face things have quieted down. | They have not. Which is exactly why I waited. | Yesterday, an hour before the close, I put on two Superfly trades. Tesla and Broadcom. Not at the open. Not on the news. At the upper edge of the expected move for the session. | The expected move is the dollar range the options market prices in for a given period. This week the SPX expected move was 195.65 points. | That is the number. | The options market is telling you exactly how much risk is priced in. When price aligns to that upper edge, you have structure behind the trade. That is what I was waiting for. | This morning both of them were golden pony boys right out of the gate. | Tesla: paid 83 cents. Filled at $1.83. That is 120%. | Broadcom: paid roughly 80 cents. Filled at $1.60. That is 100%. | Both closed the same morning. | | Here is the rule when I have two winners on. I take them off. Not because the trade cannot go further. Because I already have two at 100% or better and in a market doing 400,000 contracts before the open, the next tweet can change everything. | You do not need to squeeze every last cent. You need to be right more often than you are wrong, keep the wins, and let the math work over time. | That is the whole thing. Not predicting where the market goes. Aligning to what the options market is already telling you, entering with structure, and taking the profit when it shows up. | This is a shortened holiday week. Market is closed Friday. Wednesday and Thursday expirations are both in play. Two more days of setups. | I will be looking for the next expected move alignment before the close today. | You can get in here. | To your success, | Don Kaufman | P.S. After Thursday's close, the options market will price in the expected move for next week. Most traders will spend the weekend watching news. You can spend 90 seconds on the expected move instead. That number tells you more than anything you will see on television. |
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