You ever heard the phrase, "You'll know it when you see it"?
That's how I'm playing Friday. I haven't loved the market. Honestly, I don't have a great feel for things right now. I'm not ashamed to admit that. If anyone tells you they feel in tune with the action every minute of every hour of every day, they're lying. I see pockets I like but the overall action remains troubling. There's no way I want to short. Everyone I speak with has no desire to short anything other than an index trade here or there. Add in Citron throwing in the towel on their short side research reports and the concern of a one-sided market comes into play. One-sided markets aren't good. I hesitate to call them unnatural, but they kinda are when you think about it.
We need buyers and sellers.
So, I've retreated to my options cavern. I'm comfortable here searching for anomalies and attracting risk versus rewards scenarios. Day in and day out, I keep adding to ridiculously far out-of-the-money put butterfly or put combination trades on GameStop (GME) . I'm posting them as close to real-time as I can on Twitter, but I outlined the strategy and what I look for in these trades on this site. It's more of a "you know what you know because you know it" as much as a you'll know it when you see it.
While I'm not comfortable with the overall market, I will happily spend my day picking up very small net credits for zero risk. An added bonus, every butterfly or combination trade does have upset. Granted, I'd need GameStop to trade back below $5 by July expiration. I'd say that has less likelihood than the stock running from $10 to $500 in only a matter of weeks. Still, it's there... the chance that is.
Think of it this way: if someone handed you a scratch off ticket for free, would you take it? How about if they paid you a buck to take it? $5? $10? That's all I'm doing.
With the success of Wall Street Bets, and the vocal conviction of its members behind trades, it's hard to think this will die any time soon. And I'll give credit that there was a lot of thought put behind the GME thesis.
What we can expect now is copycat groups on Reddit and via Discord. Success is going to emulate copycats but I anticipate some of these will devolve into pump and dumps. It will destroy a lot of retail investors. Some of this seemingly abnormal action paired with the forthcoming copycat attempts might be making some traders edgy. While we're seeing the same core momentum names with strength today, it's getting more difficult to ignore the action in the indexes. We're close to technical breakdowns on the daily chart. Maybe you've forgotten about anything not related to Reddit or SPACs or cryptocurrency but give it a quick glance. The daily charts are showing some risk. Take care out of there.