Options Trades, Swing Trades, and Day Trades | The $VIX Effects

Well, hey everyone, welcome back here. Hope everyone is getting ready for an exciting summer weekend! As we talk today, the markets not quite closed yet, I have to leave a little bit early as I’m getting ready to head down to St. Louise for a speaking engagement this weekend. Hope to see a lot of you there, it’s going to be a lot of fun. I was trying to reflect on what I want to share with you tonight. I think we’re going to hit two key concepts because they tie to last week’s videos in part and concepts we’ve shared with you many times and once again we put into action this morning.

As we start out, for all of you that are longer term swing traders, investors that are watching this market kind of looking for guidance on what’s next, even in short term turning points or longer ones. One of the things we want to watch is the $VIX. We mentioned last weekend the title was something to the effect of “It’s all about the $VIX, whether you’re a swing trader, day trader, or investor” and sure enough, last week we ended the $VIX with it right here at a seven year low. Pretty much most of the week here we spent going up, up, up the ladder from that point. Of course, what that did to the Stock Index Futures was some of them particular really put the hurt on most of this week. It’s really great for you to go ahead and see how the $VIX went ahead then and influenced the market for the entire week’s trading basically and what you can learn from that.

Make sure you’re paying attention to these videos when we talk about the $VIX and how we’re expecting it to effect short term trading because that’s going to affect your options trades, swing trades and of course your regular old and fun day trades. Ryan and I were cranking them out left and right here again this morning focusing on short side trades and that was the right decision to make this morning. Then we backed off as we had a little bit of a retracement back up. Let’s talk about that, because we identified where that retracement was coming up. Now how did we do that? Let’s focus on that, it’s a great learning opportunity for everyone here as well.

What was happening here in the overall market was the NASDAQ has been strong throughout this process today. Where as you can see the other ones are under pressure and under their speed lines today whereas the NASDAQ has been at and/or above the speed lines throughout the morning. What happened was we were looking at possibly getting another short side trade here in the Russell again after the great trading we had already done and the issue here was that I was starting to see positive divergences going ahead and forming here across multiple time spans. So I pointed a couple of those out and said, “Listen, here’s the issue, we have to watch that more positive market” because there’s the 3 to the 1 strategy that I share with you all the time. So what happened was the 1 a lot of times brings the other 3 with it. It’s counter-intuitive to what most people think about. Most people, the average retail trader says to me, “Rob, three of those indices are down surely the NASDAQ is going to come with it” but in actuality as I told you many times over the years here, it’s actually quite the opposite.

Generally and statistically speaking the three come back to the one. So I said look, I know this would be great to give it another short, we all want to make even more money and close out our week even stronger, you know that fear and greed thing starts to kick in. Fear missing a move then greed of wanting to go ahead and get another great one off. The thing was that what I said was listen, because of the positive divergence and that NASDAQ we need to mark the NASDAQ where it’s at right now and if it starts to go down then we can look for another short opportunity. If it holds or starts to go up this market could actually have quite a reversal to the upside. Sure enough, no sooner did I say that within the next 4-5 minutes in the NASDAQ not only held but started to pull back up. The moment that did that the Russell just went BOOM to the upside here to the tune of 40 plus ticks, four hundred dollars contract and of course more than twice the normal maximum stop out loss for the average retail trader.

It was a great way for people to see the 3 to the 1 strategy being used live in real time there once again. As well as some of our core strategies used in our work with positive divergences and everything else. Those were just two things I wanted to share with you guys. The $VIX because that was the theme all week since last weekend’s video and then you always hear me talk about the 3 to the 1 strategy and I wanted to give you a live example of how we stopped shorting this morning right before the nice reversal.

Great stuff, we’ll have a lot going on for you guys next week, stay tuned for a bunch of big updates. We have a lot going on next week that you guys are going to be invited to and so you’re not going to miss a lick of it whether you’re a swing trader or investor. You guys have a great weekend and we’ll forward to seeing you Monday with all sorts of great information for you. Take care everyone have a wonderful weekend.

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