Today's Update: Shaking The Tree On The Weak Hands
If you're new to the New Money Club or have any questions about how to allocate positions or how to execute trades, watch this video first.
Dear New Money Club Trader,
Today’s a great example of seeing money rotate out of a hot sector into a lagging sector.
Technology is seeing money flow out and go into the financial and industrial sectors, as the latter two have been lagging so far on this rebound.
This is how the big boys keep money at work without going into cash.
I don’t see this rotation lasting long, but it bodes well for our most recent position in Vale S.A. ADR (NYSE: VALE) July 17, 2020, $10 call (VALE200717C00010000).
We’re sitting in the green with double-digit paper profits, nearing the profit zone. And once it hits, I’ll send you an immediate profit sell alert.
Until then… without further ado... let’s jump into this week’s mailbag.
. . .
Your Questions, Answered!
Hi Joshua,
When is it too late to get in on one of the New Money trades? Should I just wait until the next one?
-Bill W.
Hi Bill,
Here’s how to best handle that. Your goal should always be to get a better fill price than what is listed on the New Money Club buy alert.
With that said, I don’t want you or other readers to chase and pay too much. Every nickel counts when trading options.
If the price of the option goes over our buy-up-to price, it’s best to wait until the next day to see if you’re able to get in at the same price or better.
And know that we always aim to reflect the price at which New Money Traders are getting their fills in our official prices.
I aim to send you a trade every Monday morning, so if you missed out, there’s more opportunity around the corner. If a position moves too fast and I know most readers weren’t able to take part, I’ll provide a bonus alert.
I’m here for you step-by-step.
. . .
Hi Joshua,
I’m excited to be part of the New Money Club! What do you think about setting a stop loss (let’s say around 25-30%, for example) on your trade recommendations?
-Sam P.
Hi Sam,
I’m glad to have you as part of the club! This is a question I get asked all the time. The best stop loss is knowing your full loss before putting on a position. That’s what I mean when I say every trade is won before it’s ever put on.
When entering into an options trade, it’s smart to have an exit for a loss or profit. When using options, there are a lot of choices with strikes and expiration dates. That’s why it’s important to have the same approach for every trade.
I discuss that more in the Masterclass, and you can check it out here.
Everyone's risk tolerance, account size and reaction to losses are different. With today’s volatility and getting whipped around at times, I can’t blame you for wanting the extra protection.
This could mean using a stop loss, but I often say reduce your position size. If you are considering using a stop loss, here some things to consider:
Our short-dated options trading approach does oscillate quite a bit. But they have limited downside risk — and unlimited upside potential.
Even if one of our positions is in the red by a fair amount, there’s often plenty of time for that to turn around. If you use a stop loss, you may end up closing out too soon for a loss on a trade that’s got plenty of time to turn into a win.
This will create even more frustration.
Not only does it drain your account, but also your emotional capital. Oftentimes, a trade doesn’t go our direction right away. If that is the case we’re out less money than owning shares.
That’s why you won’t see me offer any official stop loss recommendations.
Our limited risk options allow us to trade profit opportunities with greater flexibility — and much higher potential gains. This approach has fared well, especially in today’s conditions.
As a trader, you decide what’s best for you. If you prefer setting a stop loss on these trades, you can.
I can’t provide you personalized financial advice. But, from my back-testing results, I can provide an ideal stop loss amount I’ve discovered. In the Masterclass, I discuss why using a 60% stop loss from my back-testing results provided that stop.
And remember, if you plan on using stop losses, your results will differ from what we’re tracking.
Thanks again for your question.
. . .
Those were some great questions to kick off our first mailbag. I look forward to answering more next week.
If you want your questions answered next week, make sure you email it in today to questions@newmoneycrew.com.
Talk with you on Friday.
As always, you can track our portfolio here.
To your wealth, freedom and options!
Joshua Belanger
New Money Club
P.S. Don't forget to sign up for SMS Text Alerts if you haven't already. It is on the right-hand side of the members' area.