If you have been monitoring the market over the past several months, you have seen lots of volatility without much implied volatility. That is not a good combo. Not only has there been a lot of slop and chop, as I like to call it, but we’ve also seen many moves that have been extended both ways. In addition, it is anyone’s guess how the market will open the next day to economic reports, Fed talks or quarterly earnings. What is a trader to do?
Navigating Tough Conditions
I have worked with hundreds of option traders and investors at different stages of their careers. I have found all too often that many are overtrading or trading when the market is not conducive to their style. But I have found this current market to be universally a little more difficult for most traders. For the most part, traders I have talked to agree, asking me what they should do or consider, and I tell them not trading is always an option.
The Market Will Be There
The market, I promise you, will always be there. But as a trader, particularly a full-time trader, you sometimes feel the need to trade every single day or week. There are few guarantees when it comes to trading, but I do know you don’t have to trade every day. As traders, we try to always put the odds in our favorite. If you do not feel the odds are in your favor, why trade? I’m sure you know yourself that most times you force a trade, it does not end well.
Sit It Out
Forcing trades or making trades that are more like guesses or hunches, is not going to develop you into the trader you need to be. Not trading will never increase your P&L, but sitting on your hands and doing nothing at times can save you a lot of money and plenty frustration.
