Bitcoin Winners and Losers, Saving Thousands on Naked Option Trades, Approaching The Goldilocks Economy
By:Eric Villa
This week on Truth or Skepticism, investment gurus Tom Sosnoff and Dylan Ratigan dispelled a popular narrative in financial media. No, retail crypto investors did not get duped by the recent launch of Bitcoin ETFs—retail investors were the cohort that actually made significant gains from the rise of bitcoin. In Sosnoff’s eyes, the creation of bitcoin ETFs is a (not-so) surprisingly ugly story for institutions.
A new study from our retail options think tank found that outsized market moves often occur in clusters. Historically, the average daily movement of the S&P 500 has been around half a percent in either direction, but in the past month, there has been a decrease in daily movement. So far this year, the probability of experiencing large daily moves (3-5%) in a week has been zero, but there is a fairly high chance of a 1% or greater move in a week.
Trading naked short options is the only data-backed way to increase your probability of profit on a trade, but there’s a catch. Naked options can cost thousands in margin and carry real risk. At tastylive, we use one simple strategy to define risk and improve capital efficiency: Add wings. To understand how and why adding wings to short premium positions is so important, watch our full study above.
Bears should be cautious going forward because new economic data may be great news for stocks. Bond yields have been rising alongside a reduction in inflation expectations, suggesting a "goldilocks scenario" of higher growth and less need for rate cuts. The Federal Reserve's rate cut odds for March have dropped from 81% to 42%, indicating a shift in market sentiment.
The economy is strong, with consumers spending a significant amount of money and earnings growth is expected to be positive. However, the concentration risk in the market could lead to potential tipping points.
Eric Villa is a YouTube specialist at tastylive.
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