Or how you entered LONG on Thursday morning on a 90 point SPX gap down and exited with a 2 point loss. You must work miracles.
You have to follow along pretty closely, but I saw exactly how this happened.
He averaged down as he described above, and when the big ramp came off the bottom, he got back to a bit above even, he wisely got out with a small profit and "reset" for the next trade.
Honestly, it has been amazing to watch. But IF there ever IS a hard break on a Monday like 1987, naked puts could be a world of pain.
But if he has deep enough pockets to survive that pain, and importantly, be able to add on the way down without getting margined out, there is almost always a huge rebound rally where he could again perhaps get out with a small profit.
But of course, he would entirely miss the big crash move, because if that move comes, he will almost assuredly be long, as crashes come from TERRIBLE sentiment.
This is where charts could be a huge help in timing the entry, and avoiding getting hit with big drawdowns.
But again, such events are extremely rare, and the market as measured by the indexes DOES INDEED spend the vast majority of its time backing and filling, up or down. And that is why if no crash does come, and you do not play too big on the initial position, and have reserves available to add as it moves against you as long as needed, it can be a winning strategy...as long as no Black Swan comes along that exceeds that capability.
My concern right now is that we are definitely in an area where that very rare Black Swan could suddenly appear.
Edited by K Wave, 15 October 2022 - 12:01 PM.