I’m just in the process of writing next week’s newsletter and have finalised the stock selection that will be next week’s Trade of the Week. Now while last week’s histrionics and market adjustments resulted in a heroic save, the point of the exercise is to make money, so to that end this week is dedicated.
This week’s stock as a little macro attached to it, which may create some volatility in the name. Current IV is at the low end, thus we can benefit through any IV gains. To avoid last week’s fiasco, this week the position is hedged. The market goes up, we get paid. The market goes down we get paid. What if the market is unchanged? If the market literally has zero movement all week, we lose. If the market moves, but then returns to the starting point we can get to B/E.
Now the risk is a guaranteed 40% of invested capital. That is a disaster, worst scenario loss. It is unlikely that we cannot improve that to 0.00%. Now the rewards. Probable returns to this trade are 44% return on capital. If we catch a bit of luck, those returns will rise to +256% on invested capital. Nice.
While the newsletter will make a market directional call, that is of course the original mission of the newsletter, the Trade of the Week will insulate you from worrying about directional moves, all trades in the future will be hedged positions, hell I’m here to make money, not give myself an ulcer.
In summary, this week is designed to make money. The results will appear at market close next week. So far the record [all directional trades] stands at 1 win, 1 loss, 1 B/E. I intend to significantly add to the win column.