Did you trade today based on anything that President Trump said last night? Did you trade today based on anything that he didn’t say? Are you worried that the market might tank if Robert Mueller indicts someone new? Are you trading on politics?
As much as I would like to say that I am free of bias, that is, my market view is agnostic as to politics, I’m afraid I can’t be sure. But what I am sure of is that I strive to be. I have political views, just like everyone. And I have a very strong opinion about what I think should happen. But I learned an important lesson in the 2016 election.
I went into the 2016 Presidential election thinking the odds that Clinton would win at 2:1. Based on that I thought the market would continue its steady climb of the last seven years. Consensus was that If Trump won, the market would correct about 20%. I was hedged a bit, but decidedly long.
We all know what happened. I was shocked when I got up the next morning. Overnight the S&P futures were limit down but had rebounded slightly by the morning. I did buy some put spreads when the market opened, but I did not sell the longs.
Suffice it to say that I had done the right thing, but for an entirely wrong reason. I had thought the wheels would come off the economic wagon if Trump was elected. That, simply, was just plain wrong.
As traders we are all trying to predict the future. We look at fundamentals. We listen to ‘The ChartMaster’. We have hunches. We believe, we have faith. We love Apple (and Tesla etc) and now we love Boeing. We create a story about why this happened and why that will happen next week, next month, next year.
But what I want to emphasize tonight is we should not let our political biases influence that equation. In particular, you should not let your love of Trump (or the Republicans, the Democrats etc) or your disgust of Trump (or the Republicans, the Democrats etc) influence how you invest your money. You have only one goal in mind here, to make that money grow as quickly as possible. So save that political argument for some other forum besides StockTwits. I have a hard enough time keeping my emotions in check about AAPL or FB or AMZN or TSLA or . . . . .
I got two examples from CNBC:
Joe Kiernan has become much more of a conservative mouthpiece over the years. He wasn’t always this way, but it happens. When Obama was President he was always espousing how 44 was getting ready to regulate us into a recession. Obama was President for 8 years and he presided over an economic expansion. I was trading in 2008 and 2009. I was truly concerned we could enter a depression. Congress wouldn’t pass stimulus bills saying the deficit would explode. The Affordable Care Act was supposed to kill jobs, but that didn’t happen. If I believed Joe, I would have bought nothing but S&P puts. And I would have watched my portfolio slowly crumble while the rest of the world made money.
Today, Dan Nathan on Fast Money and Options Action is our resident bear. He strongly disapproves of the Trump Administration and has stated several times that this rally we have had since the 2016 election just hast to come to an end. He thinks there is a good chance of Trump getting in trouble. I remember when there was time on Options Action where his trade was always a put spread in SPY or IWM or QQQ.
Both Joe and Dan have been wrong. I’ll still listen to them, but if I detect their recommendation is based on love of Trump (Joe) or disgust of Trump (Dan) well, I will give their opinion much less weight.
Volatility is back, deal with it!
That was the chyron on Fast Money this afternoon.
Yesterday I traded options in UVXY and VXX and bought a small bit of XIV. In the morning, when volatility spiked I sold covered calls in UVXY and VXX.
Later that day I bought calendar put spreads in both names with the strike price of 27 for VXX and 12 for UVXY.
Today as volatility pulled back, I rolled a few of those covered calls up and out and put on some call calendars at 30 for the VXX and 12, again for the UVXY.
All of this has sent my speculative account up about 1% yesterday and 1% today.
Chris Harvey of Wells Fargo thinks its back . . . . but we will see. I think it may whimper back down and we consolidate in the S&P.