thinkMoney - Summer - 2021 - 52

July 2021

In this issue:

  • In the Money
  • Four Steps to Finding Your (Trading) Zen
  • Risk Profile: The Option Trader's Travel Companion
  • Level Up Your Options Knowledge (Synthetics and Beyond)
  • Hitch a Ride to the ETF Galaxy

The Reopening Thwump

• AS WE CLIMB the pandemic wall of worry toward herd immunity, can we finally achieve the economic reopening we’ve been waiting for? Traders want to know.

We’re not out of the woods yet. Some countries continue to struggle with new COVID case numbers going in the wrong direction. But in countries where cases are declining, more people are flying, eating out, and—dare we say—going to the movies. Still, others are content to stay comfy at home streaming and zooming. After all, who wants to return to the dreaded commute? So, we could see a hybrid reopening/stay-at-home lifestyle become the new normal as we come out of the pandemic.

In the end, we don’t know how this will play out in the markets. But one thing we do know: The markets will remain unpredictable. Some might think an economic recovery would provide a tailwind for the stock markets, but that may already be priced in. Perhaps interest rates will jump higher or investors may get jittery about higher capital gains taxes. Everyone knows markets can be irrational and often leave us feeling dejected and emotionally drained. Emotions and trading don’t get along well, which is why it’s important for traders to have a calm mind before placing a trade.

The article “Four Steps to Finding Your (Trading) Zen” on page 16 could help you find a centered approach to tackling the markets. And no, it’s not about taking supplements, eating a healthy diet, or exercising. It’s mindfulness for traders. When you recognize what type of trader you are, you can utilize the strategies that fit with your trader personality. There’s no need to chase every meme stock or cherry-pick every new strategy. Focusing on achieving your goals with a clear, focused head will leave you less overwhelmed by all the information that’s out there. Feeding our brains with the right information tends to help us make more rational trading decisions.

Speaking of rational, many tools could better prepare you for different scenarios the market may throw at you. In “Risk Profile: The Option Trader’s Travel Companion” on page 20, you’ll learn how to analyze different “whatif” scenarios so you’re better able to manage risks. Things can change more quickly for option traders, so you’re going to have to keep an eye on more variables than price—like time and volatility, for starters.

We’ll see a lot of changes and new paradigms coming out of the pandemic. Be prepared for anything, and more important, be centered and enjoy your summer.

Happy trading,

Kevin Lund

Editor-in-Chief, thinkMoney