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Apr 22, 2021

Rising Star Talks Market Awareness and 2021 Trading Tips | Rolling Trades Series

By:Vonetta Logan

Oh man, do I wish I was on a white sandy beach in Mexico, after ripping down the Baja coast on my tricked out dirt bike, while my wealthy boyfriend has set up a picnic full of all of my favorite snacks and endless buffet of tacos. But no, I’m stuck in Chicago and it’s currently 38 degrees. Well, I can dream of warmer times as I recap this week’s Rolling Trades episode. 

Tony’s Trading Journey to Options Trading Expert 

Tony from Mexico probably has the best “How I Met Tom” story of all the rising stars. Apparently, after losing all of his money in his account when he was first learning to trade, Tony got sent to “learn the ropes” from Tom Sosnoff on the advice of his dad and it was a match made in trader heaven. They bonded over selling premium, using probability, and of course their love of sandwiches. 

Three Ways to Boost Stock Market Awareness

The greatest lesson from this episode is how to spark and increase your Market Awareness. As Tony says, “If you don’t know where we’ve been and where we are, then you won’t know where we’re going.” Traders of all levels should be taking the steps necessary to improve their financial IQ. Having a set of products or metrics to gauge current market conditions not only helps us identify individual options trading opportunities, but it also enhances portfolio management, including capital allocation, trade defense tactics, and understanding the types of portfolio risk. 

Really remarkable insight from Tony about the trends we saw in 2020 and of course where he thinks the trends are headed in 2021. You guys, this was recorded on the first Monday in January of 2021 and Tony’s insights about Tesla being a platform were reflected in an analysts call just this week as the reasoning why Tesla’s stock was upgraded. We also talked about the rise of the SPACs and cryptocurrencies. Tony really knows what he’s talking about. Here are the main takeaways he implements to stay on top of his market game. 

  1. Keep an Eye on the US Dollar ($UUP)

His advice to all traders is that the dollar will remain an indicator of inflationary pressure. Therefore, we should look to buy things that will go up when inflation rises. A perfect example is commodities. At the end of the day, if you can find things that will grow at a faster rate than inflation consistently, your dollar is gaining value relative to inflation. That can be huge in the long run!

2. Avoid Shorting the Market When Volatility is Trending Down ($VIX)

He also advises against shorting the market when volatility is trending down. Tastytrade research shows that when the VIX gets to low levels, these low levels tend to “cluster” for longer periods of time than the VIX spikes. He also discusses the implication of algorithmic traders that may be buying the overall market when VIX trends down, which is not good for short sellers of the general market. 

With this said, he does say he can “buy the dips” on commodities, especially when utilizing the benefits of the Small Exchange

3. Pay Attention to Bond Yields ($TNX)

From Tony’s point of view, If interest rates go up, and bond prices go down, that could be a catalyst for a stock market correction - if this relationship starts to come to fruition, it may be a point to consider closing bullish positions that may be affected by a correction. Understanding bond yields and the implication of interest rates can help you build a strong foundation for market awareness.

Tony has been trading for a while and he’s spot on. It’s like he’s the new Miss Cleo! Call me now! I definitely learned a lot of things to keep on my trader radar. What trends do you guys think we’ll continue to see in 2021? See you next week! 

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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