I know this week (and the past three) have been rough. I know the image above is a bad photoshop, but it made me chuckle after a rough week :) SPY finally hit the daily 200 moving average this week. Something we didn't see in 2024.
Tech (QQQ) has been a little weaker.
We've seen fairly aggressive selling as uncertainty grips the market. And if there's one thing the market hates, it's uncertainty. Tariffs on, tariffs off. Regulations shifting. The US Strategic Crypto Reserves in question. Stocks, bonds, and even real estate are caught in the crossfire.
I've been stressing going slow the last couple of months since we've been at all time highs and VIX was pretty low. If you had any trades on (which I do), now you know why. It's been brutal on our P/L.
But do you remember why I always talk about hiding your P/L when selling options?
I’ve been through some wild P/L swings the last few weeks. I’ve gone from being down thousands to up hundreds in just a couple of hours. It messes with your head if you’re staring at it all day. You have to learn to remove the emotions if you are gong to look at your P/L often.
That’s the difference between active, stressful trading and the passive, math-based trading we talk about here in the blog and every day in the Discord.
The Market Needs Answers: It’s Not Getting Them
Right now, we’re in a risk-off regime. That means investors are pulling back, reducing risk, and waiting for clarity. Policymakers aren’t stepping in to stabilize things, and economic expectations keep shifting.
This is exactly why I’ve been stressing going slow—even when our put-selling was working beautifully in Jan and Feb. Now, after a sharp pullback and expanding volatility, those who took their time understand why. It does not matter if the strikes of your puts or strangles are tested or not, as volatility expands our existing trades are feeling the impact. But remember this, at expiration we'll get to parity! Meaning if the put is out of the money it will be worthless.
Risk Management Matters
This pullback is a reminder why we don’t just blindly sell puts.
We roll when the strike is tested.We use put ratio spreads.We lean on 1-1-1 spreads instead of naked puts.
But let me be real with you—even with hedges, ratios, and spreads, this pullback still hurts in the short term.
It reminds me of the famous quote from Benjamin Graham that says the market is a voting machine in the short term and a weighing machine in the long term.
So let me ask you: Are you too focused on the short term?
Because even in a risk-off market, conditions for options selling are still favorable if you go slow and you are willing to own 100 shares at the level of your strike price.. The admins and I have been putting on trades, adjusting trades, and discussing different styles inside Discord. I hope you’ve been paying attention.
Next Steps
If you haven’t checked out Part 1 of my Covered Call Mini-Course, now is the time.
Also—subscribe to the YouTube channel because I’m about to start releasing regular videos for the public.
Inner Circle members have been getting weekly videos for a couple of months now. If you want in, here’s the link—it’s affordable no matter your account size.
No One Knows What’s Next—And That’s The Beauty Of It
I don’t know what next week will bring.
No one does.
And that is what makes the stock market great.
Because as Good Kids, we don’t trade based on guesses or emotions. We use math and charts to build a system where we can shut the laptop and live our lives.
Happy Trading Good Kids!
-$Maxwell
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