030. PIGGISH PLAY - Sell The News This Week
Updated
This seems like a pretty blanket statement, but I believe that it will succeed regardless of the type of news being reported or whether the underlying asset in question is directly the subject.
What I mean is that if you were to sell all earnings reports prior to the announcement, it will be a net winning strategy. If you sell the major indices into the FOMC meeting, broadly speaking, it will be a net winning strategy. And most of all, if you sell a handful of stocks into the GDP estimate, it will be a net winning strategy.
To refine the blanket down to a single thread, I would say that selling a major index ETF into GDP will offer the greatest risk/reward amongst the vast array of news that is due to report this week. The reason is simple, but not terribly obvious to the new investor: the market is damned to fall either way.
Say GDP crushes estimates (cannot imagine this happening unless the numbers include the FED's asset purchases), then the first thing to react higher will be interest rates. If GDP merely beats estimates, you will see interest rates jump aggressively and immediately. Nobody is going to believe Powell's insistence on sustained easy money this time around if the growth numbers are there.
Ok, but what if GDP misses to the downside? Well, I find this hard to believe because its only a rough estimate and data seems to only come in favorably these days. But under this unlikely scenario, the obvious reaction is to sell your equity because the economy is nowhere near the point of recovery. Thus, stock valuations are not aligned with "reality", and ought to price discover accordingly. Is Powell's outcry for sustained easy money more believable in this case?
Yes it is, but who cares? Easy money is old news and has been essentially priced in perpetuity already.
My point is that it is very likely that the broader market moves considerably lower in reaction to economic data, earnings reports, and most notably, the all-important GDP estimate.
Thus, SELL the news this time around. Better yet, buy DIA PUTS as per the Pig-Specs below:
Pig-Specs:
Main Short: Buy (LONG) DIA (Dow ETF) PUTS - Strike 332, Expiration 05/07/2021
Offset: Buy (LONG) IWM (Small-Cap ETF) CALLS - Size - 1/3rd Size of Main Short, Strike 230, Expiration - 05/07/2021
If the market continues, I think the Small-Caps will benefit most poignantly, which is why I'm using IWM as an offset for this trade.
-Gross Domesticated Pig
DIA
IWM
SPY
QQQ
GDP
What I mean is that if you were to sell all earnings reports prior to the announcement, it will be a net winning strategy. If you sell the major indices into the FOMC meeting, broadly speaking, it will be a net winning strategy. And most of all, if you sell a handful of stocks into the GDP estimate, it will be a net winning strategy.
To refine the blanket down to a single thread, I would say that selling a major index ETF into GDP will offer the greatest risk/reward amongst the vast array of news that is due to report this week. The reason is simple, but not terribly obvious to the new investor: the market is damned to fall either way.
Say GDP crushes estimates (cannot imagine this happening unless the numbers include the FED's asset purchases), then the first thing to react higher will be interest rates. If GDP merely beats estimates, you will see interest rates jump aggressively and immediately. Nobody is going to believe Powell's insistence on sustained easy money this time around if the growth numbers are there.
Ok, but what if GDP misses to the downside? Well, I find this hard to believe because its only a rough estimate and data seems to only come in favorably these days. But under this unlikely scenario, the obvious reaction is to sell your equity because the economy is nowhere near the point of recovery. Thus, stock valuations are not aligned with "reality", and ought to price discover accordingly. Is Powell's outcry for sustained easy money more believable in this case?
Yes it is, but who cares? Easy money is old news and has been essentially priced in perpetuity already.
My point is that it is very likely that the broader market moves considerably lower in reaction to economic data, earnings reports, and most notably, the all-important GDP estimate.
Thus, SELL the news this time around. Better yet, buy DIA PUTS as per the Pig-Specs below:
Pig-Specs:
Main Short: Buy (LONG) DIA (Dow ETF) PUTS - Strike 332, Expiration 05/07/2021
Offset: Buy (LONG) IWM (Small-Cap ETF) CALLS - Size - 1/3rd Size of Main Short, Strike 230, Expiration - 05/07/2021
If the market continues, I think the Small-Caps will benefit most poignantly, which is why I'm using IWM as an offset for this trade.
-Gross Domesticated Pig
DIAIWMSPYQQQGDPTrade active
Im gonna guess that the min starting point triggers sooner than later. if so, I would add DIA puts as follows:
AVERAGE TRADER'S ALLOCATION:
PUT 1 (50% Allocation) - Medium Risk Portion - 325 Strike, 05/21 Expiration
PUT 2 (30% Allocation) - Lower Risk Portion - 315 Strike, 05/28 Expiration
PUT 3 (20% Allocation) - High Risk Portion, Not for Everyone - 330 Strike, 05/14 Expiration
I like using these three in concert because your basically ensuring that if there is a crash, you are setup to not only maximize profits under most circumstances, but you can easily roll-out the position in case a tough decision needs to be made.
Good luck, it closed ATL today, you know what that means.
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