Transcription
Well, we're delighted to welcome our next presenter to the stage, John Carter, president of Simpler Trading. He has been a full-time trader since 1996 and has actively traded for the past 25 years. He grew up the son of a Morgan Stanley stockbroker and was introduced to option trading as a sophomore in high school. Mr. Carter launched simplertrading.com to post his trading ideas. Today, he has a following of more than 50,000 people. Mr. Carter publishes a free daily, as well as a premium newsletter, discussing specific trade setups in the financial markets, as well as commentary on the overall economic outlook. John, the stage is yours.
Awesome. Thank you so much. We were just commenting just how, you know, the pros and cons of COVID, but one of the big pros is just everybody just kind of moving online with ease. It's just especially from a trading perspective; it's so much easier. So hey everybody, welcome and happy new year. Let's just really dive in here. This is just kind of the, you know, 2020 was a fairly amazing year, and what we want to look at is what kind of things we have in store for 2020 and just the idea that we can take advantage of really whatever market conditions come to us. And I think that in trading there's always kind of that, you know, trying to catch the big move and, you know, trying to catch that life-changing move in like a Tesla, you know, or a Bitcoin, um, which is nice, don't get me wrong, but you can actually make a lot of money not catching any huge moves like that. And so that's what I want to really talk about, just in terms of taking advantage of the volatility and stuff like that.
Now, if you're newer to trading, you know, the typical path is something like, you know, what I'm gonna, you know, I'm gonna watch a webinar and I'm gonna read a couple of books and, you know, life is gonna be very simple. Um, the reality of trading is like this, and you know, I've been doing this for gosh, um, I think it's 28 years now, and this is how I started, and then I had this kind of, you know, period of time, let's call, let's call this eight years where, you know, as I'd make some money and I'd lose it, and I'd make some money and I'd lose it, and make some money, and then had this total disaster, and then finally it's just like, you know what, I just want to get a little bit more consistent and, you know, and and and just have an equity curve that goes from the lower left of my screen to the upper right, and that's it. That's really my only goal as a trader. And by realizing that it really kind of I was able to let go of a lot of the, I don't know, problems that, you know, traders have, or at least I had, in terms of, oh, you know, I can't take this loss because it'll make me a loser, or I gotta hold on, wait, you know, whatever all that crap is, which which doesn't serve us.
So last year, um, you know, again, I always like to just kind of show real real accounts and stuff like that. So last year I started this account with 1.4 million dollars. Um, I wired money out, but I ended the year making 16 million, 16.5 million dollars, so it was like a one thousand one hundred and eighty-eight percent return. Um, it was fantastic. This was on December 31st, and then I wired money out obviously for taxes and then to put into things like real estate and stuff like that. And then this year I'm starting off with just under five, and I just want to see what I can do. And what I'm going to be doing is basically the same strategies that I'm going to be talking about here. So, um, really what I've found in trading that works is ultimately it's patience. And one of my mentors, her name is Mary Ellen, and she told me, John, there's no trader that's born with the patience gene, and if you can't learn patience, you're not going to do this because basically trading is about the patient taking money from the inpatient, and that always, that always resonated with me. And you know what that means is that it's better to have, you know, let's call it two well-thought-out, well-planned trades per week than trying to jump on every little thing that's moving. And I think that's just, you know, I think the longer you trade, the more you really re the more you realize that you just don't need to be in everything, you know, and it's okay.
So what I found is that without a plan, what happens is that the brain takes over, and the brain is not wired naturally for the markets. So a very common thing that'll happen in trading is, you know, someone gets into a trade, they start to get excited, uh, and then once they get euphoria, which which truly is just dopamine, which is just a dopamine relation, and by the way, dopamine is an addictive feeling, and you know, people drink alcohol, they do drugs, they do all kinds of things chasing that dopamine high, and in trading it's no different. And so a lot of times what will happen is there's a, you know, a trade that's taking off, and when we see that trade taking off, our brain will release dopamine because we imagine all the money we would make had we been in it, and then we confuse that dopamine, that good feeling with, oh my gosh, I should get into this. All right, that's what causes a lot of people to buy at the highs on euphoria, and then on a normal pullback, you know, maybe back to the 21-period moving average, you know, they capitulate and they get out, and it's this horrible thing. Yet there's somebody on the other side of that cycle that's picking that up. So, and that's what we want to talk about. So if you can't get on that cycle, you know, basically your trading journey is very short; it's either you blow out your account and you're out of money, or you blow out your account and you got to put in more money, and it's a cycle that will continue until you figure that out. And so what I want to talk about today is a technical setup, which is really is just looking for what's called a greater than expected move.
Okay, you know, markets basically just kind of trade in a range almost all the time, and once in a while they pop up. Now, are there exceptions to that? Of course, Tesla has had a greater than expected move almost, you know, every week for the last two years, but 95 percent of stocks trade within a very consistent range. Now, what's nice about this range is that it's it's already calculated in advance. So this happens to be Home Depot; it doesn't matter what stock you're looking at. This happens to be Thinkorswim, you know, whatever platform you're using, it doesn't really matter, but basically what happens is that the options price in what's called the expected move. So in this case, Home Depot, with options seven days out, the options are priced for an expected move of plus or minus three dollars. Okay, and then 14 days out, the options are priced for an expected move of plus or minus four dollars and 30 cents. If you were to go out 35 days, you know, you got an expected mover plus or minus seven and 30 cents. So not only are the options priced for that move, but like 70 percent of the time, sometimes more, the stock actually stays in that range. Sometimes it'll pop up through it or pop down through it, but it closes within that range. And this also has to do with all the open interest in the options and stuff like that too; it kind of keeps things contained. So this being said is that most of the time, if you if you aren't aware of this, it works against you. You might be buying a call, the stock doesn't do what you thought it would, you know, and you lose money. And so what we want to do is we want to identify those moments in time where there's a greater than expected move. Okay, so an expected move basically just looks like this, you know, you remember the range was like three bucks or three or four dollars. Here's Home Depot just staying in a three or four dollar range. Guess what? It's staying within its expected move. So, you know, if you chase this and you buy calls hoping it's going to explode, you're going to be disappointed; you're going to lose, you know, probably all the money, especially if you buy an out-of-the-money call on that. But instead, if we wait for a specific signal that gives us an edge that's telling us there's a, you know, there's a higher probability here of a greater than expected move for a short time, that's where we can actually really kind of clean up on some various option strategies. All right.
So what is this all this is? It's a it's a relationship between the Bollinger Bands, which are here in red, and the Keltner Channels, which are here in blue. The Bollinger Bands measure what's known as a two standard deviation move. The Keltner Channels, which are blue, measure what's known as the average true range. And so what we're looking for is periods of time where the markets are getting really quiet. And so then the question is, well, okay, well, how do you define quiet? You know, how quiet is quiet? And I define quiet is to the point of when the Keltner Channels, um, or sorry, when the Bollinger Bands, you can see here how wide they are, they contract to the point that they're trading inside of the Keltner Channels. So another way of saying that is that the market gets so quiet that the two standard deviation move has actually contracted to the point where it's trading inside of the stock's average true range. You don't need to know any of that, but just that's just what it is. But when that happens, then it's basically built up a lot of energy, and it needs to release that energy. Okay, and then from there, when that happens, if I look at the momentum, and the momentum is is turning higher basically, then it's like an 85 percent probability that when it does release that energy, it's going to be to the upside. Okay, and of course, if the momentum is going lower, below zero, we would actually look for a short trade. So how this looks on a chart is we took a tool, and we just call it the squeeze, and when there are red dots, like right here, right here, and right here, that's just an indication that this is a high-probability moment in time where the Bollinger Bands are trading inside of the Keltner Channels. Okay, so for me personally, I don't care if I'm trading Home Depot, if I'm trading Tesla, if I'm trading Amazon or Facebook or, you know, Peloton. What I'm looking for are squeezes, and if the squeeze happens to be on Peloton, great; if it happens to be on Pinterest, great, but I don't care about the stock; I care about that high-probability moment in time that's going to give me an edge. Okay, so if you guys have Thinkorswim, you can just go into the platform; you'll see John Carter's studies, and it's on there, and I believe now it's officially on Tastyworks as well. So those are some platforms that have it, um, we and if you don't have those platforms, and we have it at our site where you can get it and download it.
So here's a good example of how this works. So chop, chop, we're in a range, we're in a range, we're in a range. Here's a squeeze. The squeeze gives us a heads-up that there is a greater than expected move coming up, and remember, in this case, the expected move was like three or four dollars. Boom. Instead of a three or four dollar move, we have a fifteen to twenty dollar move. Okay, so imagine in this situation that you buy calls right, and you know you're going to make a lot of money on that versus if you buy calls like say at the top of this range here, and we're still stuck in this range. All right, so that's all that's that. There's one setup I could do the rest of my life; that's it right there. And, um, it doesn't matter if you do it on a daily chart or an hourly chart, uh, you know, a daily chart basically the signal lasts eight to ten bars. So on a daily chart, it's an eight to ten-day signal. You know, on a one-minute chart, it's an eight to ten-minute signal. I don't do this on 30 minutes or less unless it's a special situation. You know, I've done five-minute squeezes on really high volatile stocks like Tesla, but other than that.
So now we got the signal, but then the question is like, I'm a huge fan of trading options, so once you get the signal, what do you do? And I always like this because it took me a long time to learn this, but just because the option is cheap doesn't mean that the option is profitable. And this is just a way of saying don't buy those cheap out-of-the-money options. I'm not saying you can't ever do it, but if you're going to put the odds in your favor, I would rather you buy one expensive in-the-money option versus 10 cheap out-of-the-money options. The out-of-the-money options are designed to expire worthless; the in-the-money options have some intrinsic value, and when the stock goes up, it's going to go up as well. So so I say watch your delta. If you're familiar with the term of delta, basically what that means is that if the stock moves a dollar, that's what your option is going to move. So if you buy an out-of-the-money delta 30 option, it's only going to move 30 cents if your stock moves a dollar. Now, don't get me wrong, if the stock moves 100 bucks like Tesla, your delta 30 option is going to make a lot of money, but on a normal stock like Home Depot, if you buy a delta 30 option, you're going to be lucky, frankly, if you make any money on it. Yes, if you catch one of those greater than expected moves perfectly, you will, but why not put the odds in your favor right from the get-go? So what I like to do is go in the money, and I'll get a delta 70 option. Okay, so basically, if the stock moves a dollar, I'm going to get 70 cents all right for every on my option for every dollar. So yeah, I'm not going to buy as many, but the odds are in my favor of, you know, basically making more money. And then I also like to sell options as well. So if I'm going to buy delta 70, then if it's a delta 50 or less, I'll sell it. All right. So I always say a picture is worth a thousand thousand words. So let's just look at the setup. So this is the setup I did on Netflix on I don't know if it was Wednesday, Wednesday, I think I did it on Monday. So on the daily chart, we had a squeeze. So I've been keeping an eye on this. Okay, and these are these are just three sets of Keltner Channels here. So I've got one average two range, two average two range, and three average range. And generally what I'm looking for is if I get a squeeze, I'm looking for a move from that 21-period moving average, you know, if it's on the upside, I'm looking for two ATR; if it's on the downside, I'm looking for two HTR to the downside. So we had a squeeze here on Netflix on the daily chart, but we also had an hourly squeeze. All right. And so when this hourly squeeze was setting up, I bought delta 70 puts, but then I also sold some call credit spreads. All right.
So what does this look like? So here's Netflix yesterday; it's down, you know, six dollars and twenty cents. So I bought, um, I bought the in-the-money delta 520 puts; I bought these at, you know, 19.64 cents, and as of the screenshot, it was at 28.45 cents. This was right before it hit my target, and so that was a good trade, um, fairly solid trade there. But on the other hand, what I also did is I sold at the time the delta 40 call and did it as a spread. So I sold that for 770 and then bought it back for about three dollars and 70 cents. So what I like to do is again, if I'm going to buy a directional option, whether it's a put or a call, I'm going to go in the money, but then at the same time, I like to sell either, you know, call credit spreads if it's a bearish trade because the calls lose money if the stock goes down or put credit spreads if it's a bullish trade because that also gives me a little bit of edge because I'm collecting premium during that, and you can actually structure this where typically you've got to do about three times as many spreads as long calls, but you can actually make that theta positive, and all that means is that when this stock is going sideways and you're waiting, you're getting paid to wait because the premium decay, instead of leaving your account like if you just had long calls, is coming to you. All right, and that's and over time that adds up. I mean, that gives you an edge. So here's uh some examples of some trades, so and it, you know, the squeeze works on, um, anything that moves basically that you can chart. So this is gold. So this is a weekly chart of gold back when it was, you know, kind of working its way up to 2000. We had this huge squeeze. If you guys remember, I think gold went to like 2060 or something like that, and it had a huge pop. So even though I'm not a huge fan of trading gold futures, I will trade them, but they're kind of scary; I will chart it on gold futures, and then I'll just go ahead and buy calls on the ETF. So in this case, I got the in the money again, delta 70 170 calls, and then I sold, all right, sorry, I bought a uh called debit spread. So again, if if you're newer to options and you're not familiar with some of these terms, you know, don't worry about it. The easiest thing is that if you know if you think gold's going up because you have a signal, you just buy some calls, you know, buy some in-the-money calls, you know, I bought these for 12; at this case, they're currently, you know, they were currently 17 and 80 cents. So I, you know, this is like, you know, it's like buying a stock at 12 and then selling it at 17, and then, um, in this case, what I did is I bought a slightly out-of-the-money call right, which I said not to do, but then I sold a call against it. Okay, and you can I don't mind doing that because then the the premium decay in this out-of-the-money call helps offset the premium decay there. All right, so that's I don't mind doing that at all. This is the SPX. So another way to do this, this was a daily chart of the S&P 500. We had a squeeze as it's getting ready to go, and it's like, okay, well, how do we do this? And again, you can buy a call if you want. What I found a lot of times is that the premium on the indexes is pretty high, and I would rather to sell a put spread. So put spreads, when I first started trading credit spreads to me were so boring; I was like, why would anybody do a spread, you know, if it's going to go make a directional bet? And as I get as I've gotten older and wiser, you know, I found that, you know, maybe instead of buying 50 calls, I'll sell 200 spreads because I'm gonna make about the same amount of money if the trade works out, but if for some reason, you know, the S&P's trade sideways, I'm still going to make money on the spread, but I would have lost money on the call, and over time that edge really helps your balance climb over time. This is PayPal. So again, what we're looking for here is it's like, all right, do we have a squeeze? Yes, we do. How do we, you know, how do we construct it? And so in this case, I went ahead and got sold some puts, a put credit spread, and then I sold some naked puts as well. Now, and you can see I sold these naked puts for like a buck 86; now they're seven cents. So I'm basically keeping all that premium. Now, if you're newer to trading or you've got a smaller account, you know, I'm not the first one, you know, I'm always saying like, look, don't you don't need to take unnecessary risks, um, so I don't necessarily say that, you know, if you've got a small account or newer you should sell naked options. If you are going to sell naked options, always err on the side of puts. If you sell naked calls, lots of bad things can happen. You guys have seen Tesla go up, you know, 200 in a week. I have friends that got destroyed selling naked calls on Tesla. You know, you just don't want to do that, or a company gets bought out. You know, if you were short naked calls on Slack and then it gets bought out by Salesforce, you know, you're screwed. You can always do a spread though. So just don't, uh, you know, instead of, uh, so you know, just as a rule of thumb, there's no reason to set yourself up for disaster in trading, right? Just just do a spread, live to fight another day.
Now, I talked about that generally I don't like doing like five-minute squeezes; I will make an exception for a crazy stock like Tesla. So this is a five-minute squeeze way back when Tesla was at 1420, and you can see it just took off here, and with this particular trade we did, you know, I did a bunch of calls, call debit spreads, you know, different things like that, and, you know, it turned into a million-dollar day on that one. So, you know, you can get some crazy stuff there. Another way to do this, so here's Crowd (CRWD). This is an intraday chart. You get the squeeze. You know, one thing I haven't mentioned here is that, you know, you can buy stock too, and stock is once, you know, if you've done options, you really appreciate stock. The only downside of stock, of course, is that it takes up more buying power, but if you've got the buying power, you know, basically you're getting a delta one option with no expiration, so I kind of like that. And in this case, too, I also sold uh the put credit spread. So the 85 put, bought the 80, had a 2.35 credit, and you can see at this point as it drops, that's good because you're short. So if you short something and you buy it back at a lower price, you keep the difference. So it's the same thing if you short an option spread; you want to buy it back at a cheaper price, and you keep the difference. So it's kind of a nice thing there.
So a couple of setups that are happening right now. In fact, this is a trade that I'm in right now: Match.com. Okay, nothing special with the stock; it's just that it's got a squeeze, got a little, this is called an RAF buy signal here, great. And what I love is that these moving averages that I like to watch are also what I call stacked positive. Okay, so these are the basically it's the 8, the 21, the 34, the 55, and the 89, and they're all Fibonacci sequencing numbers. It's just you can use 10, 20, 50. These are just what I like to use. The little skinny one here, that's the five; I keep an eye on that one as well. Basically, in a strong market, you're not gonna breach that; the strong trend is not gonna breach the eight. And if I see a squeeze and the moving averages are stacked positive and price is generally above the 21 like that, the odds of it going higher once the squeeze is released is like 85, 90 percent. Okay, and that's what's happening with Match.com. So, you know, there's not a lot when a setup like that happens. So a lot of times people say, oh, what do you think of Tesla right here? Does it look like this? If it does, I want to buy it; if it doesn't, I don't care. So that's what I'm looking for is the setup. Another one is Pinterest. This is one that we also picked up. Same thing, you got a squeeze; the moving averages are stacked positive. You know, that's that's what I'm looking for; that's what I'm looking for for a high-probability moment in time. Notice how right here Pinterest chopped sideways, so anybody that
Was buying calls, was getting chewed up. Okay, then it's going into a squeeze, right? And then we're looking for it to release that energy. So, for Pinterest, same thing; my same drill here is I went ahead and bought some deep in the money calls, 37 days out. Okay. Now, even though I may only be in this trade for six to eight days, by going out 37 days, I'm minimizing the premium decay.
So sometimes people will say, "Well, you know, I'm gonna go ahead and buy the calls, but they're gonna expire in two days." The problem with that is that if you have one bad day, you know, the stock goes against you, you're kind of screwed. But if you've got 37 days, you have time; you know, you you don't. Basically, if you get an option that's two or three days out, if it doesn't take off, you're screwed. So if you're 30 days out, not only are you minimizing the premium decay, but since you don't know exactly when it's going to go, you're able to sit there on it. So I'm always saying, when in doubt, if you're going long options, when in doubt, give yourself the gift of time. If you're going short options, totally fine to go, to go closer in; you know, take advantage of that premium decay.
The other thing I like to do here is called a diagonal. So in this case, I bought the 65 call, you know, which is in the money, 37 days out, and then I sold the 80 call against it. Now I'm losing money against that, but that's okay; that's a good problem. If Pinterest in nine days at 80 bucks, I'm still going to make plenty of money on the long calls. In a perfect world, what happens is that in, you know, nine days, Pinterest closes at 78; this call expires worthless, I keep the money, and then I continue holding the long calls for more. And so that's something that I like quite a bit as well.
So the usual questions that I get here—and by the way, I'm going to open this up for questions in about a minute—how long does the squeeze last? And it's, it's eight to ten bars. So after it fires, which is the first green dot after that series of red dots, you're looking for eight to ten bars. So a daily chart, that's eight to ten days; you know, an hourly chart, eight to ten hours, etc. How can I tell if it's going to fire long or short? So I was just talking about that with the moving averages. If the moving averages are stacked positive like that and price is above the 21, the expectation is that's going to fire long. If the moving averages are stacked negative, but more than likely, if they're mixed, you know, if the 21 is below the 55 and it's a mess, and there's a squeeze at that point, you're looking for a down move. So what I found is in trading is that a bullish move needs to be about perfect because it takes a lot of power to move a stock higher, but a short trade can be sloppy; it could be a sloppy long because all you need for a stock to fall is a lack of buyers. So it's kind of nice that way.
And then, when do you get in? I wait till after five dots. So after five dots, if the moving averages are stacked positive, price is above the 21, I'm in, you know, and you could scale in; that's fine too. And the one thing here is that market makers do not take into account the squeeze. So they do not adjust the price of the options with the idea that there might be a greater than expected move; that's the whole reason this works so well with options, uh, so which, which is great. And um, a lot of people ask, "Can you use this for Bitcoin?" The answer is yes. Here's a squeeze on Bitcoin, pop; squeeze on Bitcoin, pop. I think the current moving Bitcoin is done; it needs to catch its breath, and we wait for the next squeeze. All right.
And then, at the end of the day, as a trader, you know, everybody thinks like, "Oh, I got to make money; I got to make money." Truly your only job as a trader is killing trades that are not working. Okay. And once you get your arms wrapped around the idea that that's your only job, it makes trading a lot easier, and it makes trading, taking losses less stressful. Okay. So that's what we got. I'm happy to answer questions. If you guys want a copy of this presentation, uh, just go to simplertrading.com/john, and you'll get a copy of it. And then, uh, yeah, I'm happy to stick around here and answer questions until you guys kick me off.
Hey John, I know, I know we got a schedule. Thanks so much. Can you hear me? Okay, I can. Excellent presentation. I know our audience really appreciated it. Let's jump into our first question. One of our viewers wrote in, "If you sell a naked put, don't you have to lock up the capital to have money to buy the stock, uh, to fulfill the put? Is there a way around locking up the capital?" So it depends on your account type. Um, if you've got a larger account, you can do what's called portfolio margin. Unfortunately, that takes, uh, it's an account size of you typically over and twenty-five thousand dollars, and in that case, you don't have to put up the money for the stock. But I think in a regular margin account too, so if you have a cash account, then yes, you're gonna have to put up all the money for the stock. If you get a margin account, you don't have to, um, but a tip for you is that if you sell, you know, let's just say I, you know, Pinterest, let's say that you sell the 70 put naked, just buy a cheap out of the money, you know, buy the cheap 50 dollar put and offset it. So you can create a wide spen, a wide spread, which is, um, you know, pretty close to selling it naked anyway, but then you reduce that margin requirement quite a bit. And so I do that; I do that a lot just to reduce that, you know, pressure, that, uh, the money that they lock up for that.
Thank you. Our next viewer writes in, "Um, if your broker only has, has them at an option level zero, uh, they're a newbie, uh, saying, 'Do you suggest just doing the buying, uh, covered calls on the squeeze, or do you have something else you recommend?'" Well, so what I would do is if you can, I would ask for more permissions. And so the, the thing is they, the brokers just have to check the right boxes. If you've taken some classes, that's kind of the equivalent of three to five years experience, and you can kind of go back and say, "Hey, I've got three to five years of experience," and then they'll open it up. That's one thing I've found that allows you to do more that way. The other thing is for you, for what you're asking, it is completely fine to do covered calls as well. What I would do on something like this with a squeeze, if you own the stock and you want to do a covered call, um, you let the squeeze fire and then like five or six bars into it, sell those covered calls because at that point you're looking for it to kind of, to end and roll back over a little bit.
Uh, thank you. Do you do anything with UVXY options or spreads, uh, the fuel rights and seems volatility keeps going down? What do you think about options trading around the VIX? So on options trading around the VIX, I'm not a huge fan of it. I, I mean, there's definitely some, some, some advantages to it, and what I do is that if it looks like the market is going to puke, right, um, or I've got some concerns around the market, I'll buy some VIX calls as a hedge. But in general, I kind of stay away from it. I just, I, I personally, my trading style works good with, you know, the Facebooks and Amazons of the world. But if I'm concerned that, you know, I've got a lot of long exposure and I'm concerned the markets are going to puke, um, you know, I'll buy some VIX calls, but I don't do a lot of what I would, you know, call it advanced trading around the VIX or the UVXY.
Excellent. Thank you. Um, one of our viewers wrote in, and I guess this was brought up a few times, but they say, "Um, when I compared your sample graphs with my, uh, Thinkorswim charts, the squeeze red black setup dots were the same. Do your charts have different settings than Thinkorswim?" So there's two kinds of squeezes. So there's the default squeeze, which is on Thinkorswim, and then like last year we developed a what's called a Squeeze Pro, and that just gives you a little bit more signals, and you'll see some of the black dots too. But the, the regular squeeze that's on Thinkorswim, you can use that one by itself; it's fine, um, it's just that the, the Squeeze Pro has additional signals that pop up in there. So I think that if that answers your question, yep, if I understand that correctly, yep. Thank you very much. Um, are the moving averages more important than the momentum and the direction for the squeeze? Oh gosh, okay, good question. So yeah, from in my opinion, I, if the moving averages aren't stacked positive and if everything else is perfect, but the moving averages aren't stacked positive, I'll go look for a different setup. So a good example, I think was, oh, the name's escaping me, is it the TV one, the Roku? I think it's Fubo or something like that, but it's got like a squeeze, and it's turning, but man, it's come down so hard so far that the moving averages are messed up. And so I see something like that, I frankly just move on to a cleaner setup. And so sometimes I, you know, I miss out on some of the high flyers because I just, you know, I want to see those stacked moving averages.
Excellent. Thank you. Um, how close to maturity do you look to close positions? Okay, so, um, I do not like holding onto options until the last minute. What I've found in trading is that, you know, there's a, there's a saying that we have, you know, "Don't lose your ass on a Friday," and if there's something that's going to go wrong, it's going to go on a Friday, especially if your options expire that day. So if I've got options that say expire this week and I'm long, I generally want to be out by like Wednesday at the, you know, just, and just, you know, give yourself more time and roll it out. So yeah, I'm a huge fan of, you know, make your money and get out, and don't wait, you know, don't wait till the last minute. Excellent. All right, one last question. What is your biggest lesson, uh, for new traders, uh, that you've learned over the years, uh, whether it's focused on setting stop losses or just an education in general? What would you leave the audience with in terms of your biggest lesson for new traders? But the biggest lesson I would say is just take a deep breath. You know, the market's not going anywhere. Trading is a skill, um, don't, you know, you just, you just want to, if you think of, you know, you always hear about the magic of compound interest, right? And it's just like, you know, if your account compounds at five percent a year, you know, in 70 years you're gonna be a millionaire. Well, I don't know about you guys, but 70 years is a long time. So if you think of trading of like the ability to compound your account at say five percent a month, okay, and if you're trading options, that's not unreasonable. Well, you don't have to have, you don't have to take a lot of risk for that. You know, you can sell a put credit spread and still have 90 percent of your account in cash, and that put credit spread can help you meet that goal. So I would just say that you don't, you don't need to, you can take, you do not need to take a lot of risk. If you've got any positions that are stressing you out, cut them down, but just trade small, grind it out, and develop your skills. And as you develop your skills, other opportunities will come to you. But I think that's the biggest thing: just relax and have patience, and you know, this is, uh, trading. I've been doing this a long time, and the markets are still going to throw me curveballs, but you just gotta, you know, you take the punches, you close it out, you know, learning to close out losing trades without any shame or regret is one of the best things you can do, and just move on; you know, the market has nothing personal against you; it's just doing what it's doing.
Excellent, John. Well, we really appreciate your time today. Thank you for joining us. I know our audience appreciated it as well, and we'll hope to see at a Money Show, maybe in person later on in 2021. Yeah, sounds good. Or 2025. Right, right. Exactly. Thank you very much. Yeah, have a good one, everybody. Thank you. And just a friendly reminder to the audience, you can replay this session and every session from the event by visiting virtualpass.moneyshow.com. Thank you for attending.