Bulls Take a Breather Before their Next Moves

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,

After a big rally into the long holiday, we’re seeing a little indecision this week. That’s normal after a big rally, and could set up for another leg higher next week into July monthly options expiration.

Volatility is still elevated with the S&P 500 fear gauge, known as the CBOE Market Volatility Index (VIX), holding at 29. Meanwhile, we have a gold quietly moving up to fresh, eight-year highs.

Right now, we’re holding:

  • Vale S.A. (NYSE: VALE) Aug. 21, 2020, $12 call (VALE200821C00012000).
  • ON Semiconductor Corp (NASDAQ: ON) July 17, 2020, $21 call (ON200717C00021000).
  • Novo Nordisk A/S (NYSE: NVO) July 17, 2020, $72.50 call (NVO200717C00072500).
  • China Mobile LTD (NYSE: CHL) Aug. 21, 2020, $40 call (CHL200821C00040000).

The markets are firming up late this afternoon and should set up to push higher. If that does happen, we can look to close out a few of our positions for gains into strength.

Your Questions, Answered!

The mailbag is full, so let’s get to your most pressing questions:

“Hi Joshua,

When I go to place my buy orders, I get two options: day or good till canceled. What’s the difference between them? And which one should I select?” ~ Sam H.

Hi Sam!

When you place these orders, you’ll want to use a “day” function on your brokerage account. The reason here is simple...

If you enter “good till canceled,” it keeps that order open until it’s either filled or canceled. I don’t suggest leaving orders open or using “good till canceled” when trying to get into option trades.

Markets move — you don’t want open orders that you forgot about to get filled.

If you still want to make the trade, you can cancel the order and replace it with a new limit price. This avoids any surprises with orders getting filled that you forgot about.

. . .

Let’s jump into the next question in the queue:

Hi Joshua,

Why don’t you provide any stop losses with your trades? ~ Jim S.

Hey there Jim,

Stop losses are a false sense of security, and are mostly used by retail traders. That’s why the position sizing before entering the order is the best way to manage risk.

Once we place a trade, we’re at the mercy of the markets. Stocks could be halted, or news could come out and tank the stock, rendering our options worthless.

A lot of things affect the pricing of options, which makes it tough to have a hard stop loss level. In my experience, when we make a bet, the best course of action is to let it play out but use alerts when prices trigger those levels and then exit.

At the end of the day, it’s up to you to decide and understand your risk tolerance. If a trade is making you lose sleep at night, cut it, and move on.

Anytime we make a move, I’ll shoot you an email alert. You’ll never be flying blind. Every position I provide is accounted for whether it’s a win or a lose.

. . .

With that said, I look forward to answering more next week. If you want your question answered, make sure you email it 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