YouTube weekly roundup

Vecchio Heeds Sosnoff’s Warnings, An Easy Guide to Earnings, The Wheel Strategy | tastylive's Weekly Roundup

By:Eric Villa

Our best stories on YouTube this week.

  • Tom Sosnoff sees reason for caution as markets rise.
  • This is your simple guide to earnings season.
  • Stock market crashes are mostly unpredictable, but these tools can help.
  • Don’t use this options strategy until you understand how to manage it’s risk.

Opinions of the superior film in the Barbie vs. Oppenheimer debate run hot in the tastylive offices. 


Markets turn up the ignition, Tom Sosnoff pumps the brakes



In this week's financial analysis, Tom Sosnoff expressed his concerns about the current market trends. Despite the falling dollar and rising stocks, which would typically encourage traders to sell a put or two (or three or four), Sosnoff believes a lack of worry in the markets could be cause for concern. Chris Vecchio, CFA, and Nick Battista later discussed the reasons for and against this contrarian sentiment, reminding traders to always be prepared for sudden market changes.



Takeaways:

  1. Despite the recent run-ups and multiple expansions, some stocks, particularly those in the middle and lower tiers, have not participated in the upside. If these stocks start to gain momentum, it could push the market higher.
  2. The regional banking crisis has been a clear and present danger for the Russell, but if it starts to rally, it could signal that the worst is behind us and that other sectors may also see gains. The improving equity of banks, coupled with lower yields and shrinking unrealized losses, is creating a positive feedback loop that is boosting confidence.
  3. The market seems to be comfortable with the Fed's control over inflation, as indicated by the ISM Services index's prices paid component. The correlation between this component and headline CPI suggests a lower inflation rate by September, giving the Fed room to potentially cut rates.

If you’re trading earnings, watch this first



When considering trading earnings, it's essential to look at the broader themes that determine how certain stocks, such as Nvidia Corporation (NVDA), Netflix (NFLX) and Apple (AAPL) might trend before, during and after earnings. Market expert Jermal Chandler suggests that understanding these themes could provide traders with valuable insight and potentially better trading outcomes.

To see what the three themes are, watch Chandler’s full analysis and read his article on earnings here. 



Markets can crash at any time. Use these two tools to manage that risk.



When markets crash in 2020, how could traders measure, prepare and understand those concepts? We broke down how traders can understand skew and kurtosis to manage their risk. 



Takeaways:

  1. Skew measures the asymmetry of a distribution and the degree of positive or negative tail risk.
  2. Kurtosis quantifies the extreme outlier values in either tail.
  3. In the 2020 market crash, there was a negative skew in the price of options, indicating a longer tail on the left side of the distribution. This means that the biggest market moves were to the downside, resulting in more fear and risk to the downside.
  4.  In the post-crash recovery, there was a positive skew in the price of options, indicating a longer tail on the right side of the distribution. This means that the biggest market moves were to the upside, reflecting a market rally or recovery.
  5. Higher implied volatility rank (IVR) in stocks is associated with a higher probability of outlier moves and a higher kurtosis, indicating fatter tails. This suggests that there is heightened risk in markets with low implied volatility, as there is a greater chance for large movements in stock prices.



99% of traders make this mistake with the wheel strategy



This week on Options Trading Concepts Live, Nick Battista and Mike Butler gave a full breakdown of the wheel strategy. Traders across account types and risk tolerance can find ways to leverage this strategy, but make sure you watch Battista and Butler’s full breakdown to understand common mistakes traders make. 



Takeaways:

  • Short-term vs. long-term Use: The Wheel strategy can be used as a longer-term strategy, but it can also be employed for shorter durations, such as 30 to 60 days or even weekly time frames. It can be used as a way to quickly reduce cost basis and enter a stock position at a more favorable price.
  • Risk management and conservative approach: The Wheel strategy is considered a more risk-averse and conservative approach, making it suitable for traders in IRA accounts or those who want to be in shares more efficiently. It allows for a higher probability of success and protects against downside moves.
  • Limitations and trade-offs: While the Wheel strategy offers benefits such as collecting premium on both sides of the market and reducing PL volatility, it also has limitations. By capping the upside profit potential, traders give up the opportunity for unlimited gains. However, the strategy can still be profitable in sideways or slightly moving markets.

Eric Villa is a YouTube specialist at tastylive. 

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.


Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.  Options, futures, and futures options are not suitable for all investors.  Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.

tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.

tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.

tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.

© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved.  Applicable portions of the Terms of Use on tastylive.com apply.  Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.