Posted by Martin February 02, 2025
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Futures opened down -1.85% on trade war fears.


So, our convicted felon did it once again. Americans didn’t learn their lesson in 2018 and they need to re-live the shit show once again. Today (Sunday, February 2nd, 2025) the furues opened down -1.85% on trade wars fear as I was afraid it would happen. On Friday, I finished trading with the following position:
 

Futures opened down
 

After the futures opened, this position was deep in the money. The price smashed through all my strikes. I hoped, I could close the position as is and be done with it. I hoped the extra long puts would I added on Friday would help to offset losses of the short puts. But it was not the case. Closing the trade would still be a debit trade. And that I didn’t like at all. Also, closing the trades would require additional buying power which I didn’t have! Thank you convicted felon for f-ing it all up!

 

Futures opened down
 

So, I decided to do a series of adjustments and rolls to eliminate the trades with minimal losses. I must admit, it ended up a successful operation. I did multiple closures and two rolls and I was able to get rid of those trades and make money, although, I cannot claim the cash as of yet.

Here is a list of the trades I took and list of contracts as I was unwinding the trade:
 

Futures opened down
 

I ended up reducing contracts from 16 to 3. The 3 contracts are those I rolled, the remaining ones were closed for additional profit.
 

Futures opened down
 

I am not happy with the overall outcome as it is throwing a wrench into my plans despite making money. This is still adding stress to my buying power which is still extremely low (due to my last year’s overtrading). And that’s why I am not happy with the outcome. I hoped to keep unwinding the trades, not fucking with them around because we have a idiot in White House. But it is what it is. We cannot do anything about it. The markets rarely do what we want them to do. All we can do (as Mr. Garfield, played by Danny DeVito, said it in Other People’s Money) is to adapt. So let’s keep adapting.

 
 




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Posted by Martin February 02, 2025
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Donnie is f-ing it up again


So Donnie is on it again. It is astounding how ignorant he is. Or he is not and all this tariff thing is on purpose. No matter how hard I try to think about what is he trying to achieve, I cannot come up with any idea on “why.” Trump negotiated a trade treaty during his first term and now he is complaining about subsidizing Canada? I thought his treaty was supposed to be a great, bigly deal! Biden hasn’t changed the treaty! So what went wrong?

I think, what went wrong is the fact that Donnie is f-ing it up again so he needs to maintain visibility and the best way to do it is to piss everyone off. An the entire nation will suffer.

It pisses me off. Yes, I admit I opened a 0 DTE trade that went sour thanks to idiot Trump but this idiocy is bigger than one trade.

On Friday, I opened a credit put spread. It was an extremely safe trade – with 0.07 delta which was beyond 2 SD (standard deviation):
 

Donnie trade
 

At least I thought that it was a safe trade. I was so far away from the market that what could go wrong, right? Well, Donnie went wrong, as usually. What can you expect from a business genius who bankrupts a casino! But what drives me nuts even more is that Americans haven’t learned their lesson the first time. They needed their assess kick once again. So they voted for this moron once again. Will they ever learn? What happened to American that fought Nazism, Fascism, and Communism and today it is embracing it? On the other hand, it is fairly laughable hearing MAGots spitting their rage on socialism (none of them knows what it is) and today crying that their SNAPs were cancelled.

Well, the trade went south fairly quickly:
 

Donnie trade crash
 

At first, I was contemplating whether to close the trade for a loss or roll it or try to adjust it. Usually, when the markets crash beyond 2 SD, it is a rare event and they may be a bounce. But if we look at what happened during the Orange Era 1.0 the markrets took quite serious hits before they stabilized.

The implementation of tariffs, particularly those targeting China, had notable effects on the U.S. stock market. The initial announcement of tariffs in March 2018 led to a significant market downturn, with the Dow Jones Industrial Average dropping 724 points (approximately 2.9%) due to concerns over a potential trade war. Companies with substantial business in China, such as Caterpillar Inc. and Boeing, experienced considerable declines in their stock prices.

Throughout the trade tensions, investor uncertainty contributed to market volatility. For instance, on December 4, 2018, the Dow Jones fell nearly 600 points, reflecting apprehensions about the escalating trade conflict.

Despite these fluctuations, the overall performance of the stock market during Trump’s first term was strong. The Dow Jones Industrial Average increased from around 20,000 points at the beginning of his term to nearly 31,000 points by the end, marking a substantial rise. The S&P 500 also saw an average annual return of 13.73% during this period, ranking third among presidents since the late 1800s.

In summary, while the introduction of tariffs during Trump’s first term led to periods of heightened market volatility and specific sector downturns, the broader stock market demonstrated resilience and achieved significant gains over the term.

Now, I decided to roll the trade, although I am doubting that move. Maybe, I should have closed the trade instead. Next week will show what the right move to do was. But I am prepared to keep adjusting the trade as long as needed to finish it as a winner or break even trade.

What have I done once the trade crashed through my short strikes? Well, I made three rolls and adjustments. The first two adjustments were just rolls. The first roll was away in time but same strikes. The second roll was another roll away in time but also lower. None of these rolls worked, although I have collected more credit. So I used a third adjustment that I call an “uneven roll.” This roll is to roll only short strikes, add new long strikes, and add more contracts to collect a credit.

So, originally, I had six 0 DTE contracts. After the uneven roll, I now have 16 short puts and 22 long puts. This gives me a hedge should the market continue crashing. I can close the trade for a credit even if the markets smashes through all my strikes.
 

Donnie trade adjustment
 

I will have a clearer picture today at 4 pm (MT) when the futures market open and see if we keep crashing or this time the markets priced the tariffs in. Definitely, the ignorant Trump is going to create a significant turmoil and unlike in his first term, he can actually spark a recession. In 2018 when he was imposing tariffs, we didn’t have a fragile economy, high inflation and high interest rates. Today, we have high interest rates and tariffs are inflationary. This may force the FED to stop cutting rates to keep inflation in check. That will be a domino effect. Higher rates and tariffs will eat up profits and that will impact the markets. It almost seems like it is time to go bearish.

 
 




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Posted by Martin January 16, 2025
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Market Rally Rejected at Resistance


It is evident that today the market rejected the rally at the resistance. The bulls battle may still not be lost, we may be experiencing a pause after yesterday’s strong rally. The market bounced from the support line of a declining wedge and rallied hard. Probably too hard. We would prefer an incremental increase over time than what we have seen yesterday:
 

Rally Rejected
 

Now, bears have an upper hand. If bulls who bought into the yesterday’s rally join bears, we may see another leg down. However, the chart above is a futures’ chart, if we look at SPY or SPX, we see a gap:
 

Rally Rejected
 

It is quite possible that we will go lower to close that gap and bounce up again. The markets had a 4.2% pullback so far so nothing too bad yet. But it may get worse. Definitely, we need to be prepared for the possibility of further decline unless today’s price action was just a pause. We will see tomorrow, however, Friday’s are typically weak days in declin9ing markets, so it is possible that we will go lower.

 
 




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Posted by Martin January 16, 2025
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VIV Telefonica Brasil S.A., ADR


VIV Telefonica Brasil S.A., ADR broke the resistance and closed above it yesterday. Today, it is re-testing it. We believe, the stock may move to $8.50 and eventually above $10.50.
 

Recent Decline Analysis:

 

Price Action:

 

VIV saw a significant selloff from the $10 range in October 2024 to lows around $7.50 in December 2024. This sharp decline suggests bearish sentiment or fundamental concerns.
 

Key Moving Averages:

 
The stock was trading below its 50-day and 200-day moving averages for an extended period, confirming a bearish trend. However, the recent move higher suggests a potential test of the 50-day SMA, which could act as a resistance or pivotal level for a trend reversal.
 

Volume Patterns:

 
Increased selling volume during the decline indicates institutional or broad market selling pressure. Recent rebounds have shown lighter volume, signaling cautious accumulation rather than aggressive buying.
 

Potential Drivers of Decline:

 

Sector Weakness:

 
Emerging market telecom stocks, including VIV, can face added pressure due to economic uncertainty or higher interest rates globally. Rising rates often reduce the attractiveness of dividend-paying stocks like VIV.
 

Brazilian Economic Environment:

 
The Brazilian economy may have faced challenges such as currency devaluation, inflation concerns, or political uncertainty, which tend to weigh on investor sentiment. As a company operating in Brazil, VIV’s revenue and margins are sensitive to domestic conditions, including regulatory decisions.
 

Dividend Concerns:

 
Telefonica Brasil is known for its dividend payouts. If investors perceived any risk to future payouts, it could have spurred the selloff.
 

Global Emerging Markets Trends:

 
Weakness in global equities, especially in emerging markets, may have amplified the decline in VIV’s stock price.
 

Bullish Case Moving Forward:

 

Technical Setup:

 
The stock appears to have formed a base around the $7.50 level, bouncing higher in recent trading sessions. A successful break and close above the 50-day SMA could act as a bullish signal, with the next resistance near $8.50 and then $9.00.

 

VIV Telefonica Brasil
 

Valuation and Dividends:

 
VIV may offer attractive valuation metrics, especially if the recent decline was overdone. With a focus on dividends, a stable payout could attract income-seeking investors, particularly as global interest rate hikes slow down.
 

Economic and Sector Tailwinds:

 
If Brazil’s economy stabilizes or improves, consumer spending on telecom services could rebound. Favorable policy changes or easing inflation could boost sentiment toward Brazilian equities, including VIV.
 

Rebound Potential:

 
Emerging market stocks, particularly in the telecom sector, tend to see strong rebounds if market sentiment improves or when risk appetite returns globally.
 

Key Levels to Watch:

 

Resistance:

 
$8.50 (previous support turned resistance).
$9.00 (recent peak).
 

Support:

 
$7.50 (recent low, must hold to prevent further downside).
 

Moving Averages:

 
Watch for a sustained move above the 50-day SMA as a bullish confirmation.
 

Conclusion:

 
While the recent decline was driven by bearish macro and company-specific factors, there is a potential bullish case for recovery if the stock can maintain its recent upward momentum and broader market conditions stabilize. Income-focused investors may also re-enter the stock, drawn by its dividends and potential value at these levels. We bought VIV this morning to see if our expectations materialize. We also placed a stop loss at $7.60.

 
 




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Posted by Martin January 03, 2025
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If You Want to Get Crazy, Start Trading Futures Options!


Boy, what a year! 2024 was truly an incredible journey. I discovered futures—specifically, futures options. Not that I didn’t know about them before, but I was ignoring them. When I finally gave them a shot (or should I say they gave me a shot?), I was blown away. It was easy, fast, and extremely profitable. That is, until volatility hit the markets in August. Up to that point, it had been smooth sailing; after that, it became a Herculean struggle—and it still is.

We tripled our account in 2024! Our cash grew by 330%, and you can imagine the excitement. I felt like the king of the world, already picturing the golden gates of early retirement. And I traded like that too—which turned out to be a huge mistake. I was intoxicated by the minimal restrictions on trading futures and options: no Pattern Day Trader (PDT) rule, no day-trading limitations, and the allure of capital efficiency. Smaller capital to trade big? Count me in!

But therein lay the hidden danger—not in trading big itself, but in the devilish details of SPAN margining. SPAN is a fantastic tool if you manage to trade small and keep more than 50% of your account in cash reserves. Honestly, 60% is probably safer. The trouble is, SPAN is a black box. You don’t realize what’s happening until it happens—and suddenly, you’re hit with a margin call. One moment your buying power looks great at +$20k, and three minutes later, it’s deep in the red. You frantically close trades to free up capital, thinking you’ve fixed the problem, only to find your account is $20k underwater after the market closes. Digging out of that hole? Not fun.
 

trading futures options
 

Since August, I’ve been battling SPAN every day. It feels like the market—or SPAN itself—is playing games with me, laughing at my every move. The once-thrilling big gains turned into a defensive war to protect them. I haven’t opened a meaningful new trade in three months. Any trades I’ve opened were small and carefully designed to increase buying power rather than risking further losses.

SPAN feels like it was designed to drive traders mad, not to facilitate regular trading. But the lesson was crystal clear: money management is everything. If you want to dive into this world, I highly recommend Nauzer Balsara’s excellent book, “Money Management Strategies for Futures Traders”. There, you’ll learn just how little it takes to completely ruin yourself—and how to do the opposite to stay afloat.

This year was a steep learning curve for me, and I learned it the hard way. We didn’t get wiped out—yet—but I wish I’d spent more time understanding SPAN margining before opening trades like there was no tomorrow and counting on big bucks rolling into our bank account. Now, I’m praying for volatility to ease up so SPAN gives me a break – so I can trade big again! (And no, that last part was sarcasm.) I’m committed to staying small: using no more than 30–40% of my available buying power and opening new trades only after the old ones are successfully closed. If I need to adjust trades, I’ll wait patiently until they’re fully resolved.

 

This is my New Year’s resolution!

 

From now on, I’ll manage open trades to a successful close before applying strict money management strategies. These include closing trades at the profit target, using stop-loss orders on futures themselves, and avoiding overloading my portfolio with too many futures options—because I’m not waking up the SPAN beast again.
 




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Posted by Martin November 16, 2024
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Letter to Investors – October 2024


Dear Partners,

October has been a month of challenges and careful recalibration for our fund. Reflecting on this period, we faced leverage concerns and overtrading issues that tested the resilience of our strategy and brought valuable lessons about liquidity, risk management, and prudence. These experiences echo the words of renowned hedge fund manager Paul Tudor Jones, who cautioned against the dangers of leverage. His insights highlight that leverage, while a powerful tool for amplifying gains, can quickly become a risk if it forces a portfolio into unwanted selling during volatile market conditions.

As Jones emphasized, the main danger of leverage lies in its potential to compel rapid, sometimes unfavorable selling when a portfolio’s capital is stretched thin. His words serve as a powerful reminder that even seasoned managers can find themselves at the mercy of leverage. Reflecting on this, I was reminded of the saying from the Czech Republic: “Fire can be a good servant but a very bad master.” The same is true for leverage. If managed correctly, leverage can serve us well; when overused, it risks taking control of our portfolio.
 

Recognizing the Risk and Course Correction

 
This October, when the market’s volatility surged, and margin calls intensified, we had to face the reality that our use of buying power needed reassessment. Futures options differ from options on stocks or indices in that their buying power requirements fluctuate more frequently, often being marked to market daily. While I initially took the temporary release of buying power as an opportunity to add new positions, this led to a momentary strain on our account when that same BP was swept back unexpectedly due to increased volatility. This experience underscored the need for disciplined BP management, particularly with futures options.

However, a few prudent measures helped us navigate through this volatility. By maintaining cash reserves, we were able to satisfy margin calls without forced liquidations. Recognizing the potential risk early enough allowed us to take immediate steps to stabilize the portfolio.
 

High Volatility’s Role in Portfolio Stress

 
Some of the current portfolio stress has been driven by the unusually high volatility in the market, with certain indicators spiking to levels around 76%. This extreme volatility has been fueled by factors including the election cycle and broader economic uncertainties. While this heightened volatility places temporary strain on the portfolio, we anticipate that stress to ease as volatility declines, particularly after the election. If the election outcome is smooth and uncontested, we expect a decline in market volatility, which would provide relief to our portfolio. However, should the election results be contested, this high volatility—and, with it, portfolio stress—may continue or even intensify in the short term.
 

Implementing New Safeguards

 
As part of our course correction, we established new rules for trade entries. These measures are designed to prevent overexposure and include maintaining a set minimum BP, capping the number of open trades, and ensuring a minimum level of cash reserves. These reserves serve as a buffer to provide flexibility if we encounter heightened volatility, and if used, they are to be rebuilt promptly.

Additionally, we halted redemptions and distributions temporarily to protect the portfolio’s integrity during this period of recalibration. I’m encouraged to report that these adjustments have proven effective. Our buying power is gradually increasing, cash reserves are rebuilding, and our trade count is being managed within set limits. With these risk parameters now in place, we have resumed distributions and redemptions, albeit with continued caution.
 

A Path Forward

 
While we’re not entirely out of the woods, the portfolio is in a much stronger position. October’s events have underscored the value of liquidity and conservative leverage management. Our portfolio has shown resilience under market pressure, with improvements in BP and cash flow. This period has reinforced our approach to mindful trading, and I am confident these adjustments will support long-term stability.

Thank you for your patience and continued trust as we work to create a more robust and resilient portfolio.

With regards,
 

Martin Zourek
Managing Director,
ZZ Capital Management, LLC




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Posted by Martin November 15, 2024
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Consumers keep spending but worry about inflation


Schizofrenia of the American society in full display. Today’s news on Yahoo Finance delivered an article that October retail sales topped estimates in October and September sales reports were revised sharply higher. So the data shows that consumers keep spending and buying (usually what they do not need) like crazy.
 

consumers keep spending
 

On the other hand, these same consumers punished Biden-Harris (and Democrats) at the polls blaming them for “high inflation and high prices.”

Dear American consumer, you need to make you mind. You cannot be whining about high prices and then go shopping like crazy.

&nbps;
 




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Posted by Martin October 20, 2024
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What is the recommended time for someone with no investment experience to start buying individual stocks? What is a suitable initial investment amount?


The recommended time to start investing for someone with no investment experience depends on many factors. There are a few steps I would recommend doing:
 

  1. Set a goal. The goal can be created by answering questions like: Why do you want to invest? What is your time horizon? What do you want to achieve from your investments? Will you be active or passive (meaning how much time are you willing to spend monitoring your account, adjusting investments, etc.)? For example, my goal was to create a portfolio that would replace my income as soon as possible. I planned to be very active and spend an hour or two every day monitoring and analyzing my portfolio, stock market, and research stocks. This can take you a day or a week to think about your goals and objectives.
  2.  

  3. Once you know your goals and objectives, start searching for investment vehicles that meet those goals. Will it be growth stocks, dividend stocks, trading options, or futures? No matter what you find, paper trade it to learn the mechanics of investing/trading. Read about the vehicle you plan to use. Hang on with other investors/traders on social media and ask questions. This is the longest part, which may take months or years. That depends on what you choose to do. If, for example, you want to start building wealth right away, have a long-term horizon, and want to invest with minimal effort now and learn later, you can invest tomorrow. As Warren Buffet said, buy an index, for example, SPY, and invest regularly every month. That will take you one day to start (well, it may be more days because of waiting for your brokerage account to get open). While you are investing in SPY (in our example above), you can spend time learning about other investment vehicles like options, dividend stocks, futures, etc. You will be building your account in the meantime.
  4.  

  5. To start investing, you can start with as little as $1 these days. You need to find a broker that will allow you to buy fractional shares of a stock or index and be commission and fees-free (most of them are free today). So, buying stocks or indexes will be easy and with minimal capital. However, if you want to venture into options or futures, you will need at least $2,000 – $5,000 minimum capital (depending on a broker). This also depends on the type of account you open with a broker (cash or margin).
  6.  

  7. If I were an inexperienced investor starting my investment path, I would do the following:
     

    • Open a brokerage account.
    •  

    • Set an automatic deposit of, for example, $100 every month.
    •  

    • Set an automatic investment of $100 a month to SPY (if the broker allows automatic investing; if not, do it manually every month).
    •  

    • Let the investing go on autopilot until it grows to larger amounts. If you can afford to invest more, increase your monthly contributions as much as possible.
    •  

    • Learn about stocks while still auto-investing. Learn about other strategies. Learn about dividend stocks and growth stocks. Learn about options. Paper trade strategies you find, paper trade options, paper trade futures, and learn from it.
    •  

    • Train your mind to ignore the market’s everyday fluctuations. Subscribe to services that can help you stay informed about the market (for example, my newsletter, LOL). Learn to distinguish between pullbacks, corrections, and bear markets. I am not necessarily a buy-and-hold investor, and I developed a strategy (signals posted in my newsletter) to get out of the market when we see a bear market while ignoring pullbacks or small corrections and going back from cash when we see the end of the bear market. But if you decide to stay invested (buy and hold) all the time, be prepared to stomach large draw-downs (20% – 70% declines during violent bear markets like in 2000–2003, 2007–2009, and 2020; many investors lose money panicking and selling suddenly forgetting that they were “buy and hold” investors).

     

  8. Once you learn other strategies, understand them well (know how they make you money as well as how they can lose you money, and if they are losing you money, how you can react, adjust, or repair the trade), paper trade them, you can start using them slowly in your account too.

 




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Posted by Martin October 19, 2024
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Letter to Investors – September 2024


Dear Partners,

Reflecting on September’s trading, it is evident that we navigated a challenging yet successful month. The market offered its fair share of turbulence, with concerns about interest rates, geopolitical events, and persistent volatility. However, we ended the month in a strong position through disciplined strategy adjustments and strict adherence to our trading rules.

Portfolio Overview

Our portfolio saw significant growth in September, with profits totaling $237,540.50 for the month and $371,471.00 year-to-date. While the market threw us a few curveballs, including periods of heightened volatility and unpredictable market moves, we remained steadfast in managing risk and finding opportunities.
Throughout the month, we emphasized risk management, adjusting positions as necessary while remaining focused on our long-term objectives. The portfolio remains predominantly bullish, but we are continuously prepared to adjust positions should market sentiment shift. Our flexibility is the key to weathering uncertainty.

Key Takeaways from September

During the month, we focused on several key strategies:
 

  1. Tightening Risk Management: Volatility was a persistent theme in September. Futures volatility spiked above 70%, adding a layer of complexity to our trades. However, through diligent monitoring and pre-emptive adjustments, we were able to mitigate significant risk. One of the highlights was rolling longer-dated trades into shorter DTEs (days-to-expiration), which helped us free up valuable buying power (BP). While we successfully executed these rolls, the heightened volatility reminded us of the potential pitfalls when shortening DTE too aggressively. It’s a balancing act we’re refining as we go.
  2.  

  3. Buying Power and Overtrading Awareness: One of the most critical lessons from September was recognizing how the mark-to-market nature of futures and futures options can impact BP. With frequent fluctuations in BP throughout the trading day, we sometimes mistook short-term BP releases as fully available capital, leading to overtrading. By the end of the month, we established a new internal policy to limit the number of open trades and ensure our BP stays above a predefined threshold. As of October, new trades will only be opened if BP is above $30,000 and fewer than 35 trades are open.
  4.  

  5. Cash Reserves for Stability: As Warren Buffett famously said, “Cash is to a business as oxygen is to a body; never thought about when it is present, the only thing in mind when it is absent.” After several BP squeezes, margin calls, and volatility spikes, we have reinforced our commitment to building a solid cash reserve. Our cash reserve goal for October is $35,000, with a longer-term target of $77,000. This reserve will act as a buffer to absorb unexpected shocks and maintain trading and fund management flexibility. This strategy will help prevent any future margin-related pressures.
  6.  

  7. Performance Under Pressure: Despite the market’s erratic movements, most trades performed well, and we closed September with significant gains. Throughout the month, our risk remained well-managed, and while a few positions required adjustments, there were no significant losses to report. The adjustments we made delivered $2,400 in credits in the month’s final days, contributing to our overall success.

 

Looking Ahead

As we enter October, we carefully watch several key economic indicators, including labor market reports and global geopolitical events. While September saw fears of potential hard landings, the data on jobs and economic growth support the case for a robust market. We are cautiously optimistic and expect continued bullish momentum as the year draws closer. However, we will remain diligent in adjusting trades should market conditions change.

Closing Thoughts

September provided us with valuable lessons in discipline and risk management. We navigated the challenges by adhering to our trading plan and adjusting positions thoughtfully. Our team is confident that these actions have placed us in a stronger position. However, we are still experiencing a cash crunch due to volatility exceeding the 55% threshold. This cash crunch puts hardships on our payouts that will force us to reduce or suspend payments if not resolved next month.

At ZZ Capital Management, LLC, we are committed to transparency and professionalism in managing our investors’ capital. We are dedicated to building wealth sustainably, focusing on long-term value and mitigating short-term risks.

Thank you for your continued trust and partnership. Feel free to reach out if you have any questions about our performance or strategies. We are always happy to provide insight into our process.
 

With regards,
 

Martin Zourek
Managing Director,
ZZ Capital Management, LLC




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Posted by Martin August 08, 2024
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Why I decided to abandon dividend investing


I know, many dividend investors will disagree with me but I decided to abandon dividend investing in our business account. It was a tough decision and liquidating my dividend portfolio was hard for me – emotionally. But investing should be void of all emotions. You shouldn’t be in love with your stocks or strategy. So why I decided to abandon dividend investing?

The short answer is simple. I make more money trading futures.

I trade options against futures and futures contracts alone and I can trade both sides of the market. If the market is bad and selling, I can trade calls and call spreads. If the market is optimistic, I can trade puts and put spreads. But the biggest benefit of options against futures is that if the trade turns heavily against me, I can just roll it into the opposite trade (like calls into puts, or puts into calls), or roll it higher or lower (strikes) as needed and in many cases still as credit trades and thus for a profit. I can’t do that with stocks.

For example, I invested in Icahn Enterprises (IEP) stock. Then it got attacked by a short seller. Later on the company cut the dividend. The stock crashed more than 50% and never recovered since then. Many of these crashes happen after hours or before regular trading and when the market opens, you are already sitting on a pile of losses. And you can’t do anything about it. Although I could mitigate the losses by trading options around the position, and received plenty of dividends, that position was still under water. All you can do is “ride it through.” But this “riding through” it may take several years and in many occasions, you may never recover.

If you are going to tell me not to invest in questionable high yield “traps”, let me remind you about once dividend aristocrats and kings like AT&T (T), Disney (DIS), Walgreens (WBA), or WYNN… or some times ago, Kinder Morgan (KMI)… or Realty Income (O)… all these stocks were once shining dividend payers… then they crashed, cut the dividend, and many never recovered. Realty Income (O) is down since the end of 2021 and it may take another year or more to get back to the previous all time highs. And what do you get for it? A measle 4% dividend. Not worth it.

In the last week or two when the market crashed, trading options against futures I made more money than in regular bull market.
 

abandon dividend investing
 

All I had to do is either roll in the money puts into OTM calls, or roll expiration away and lower strikes, and start trading calls. Now, when the market is again optimistic and turning bullish again, I am changing my trading into puts and put spreads. I only have one call strikes trade that got into trouble today and I am rolling it out, away, and partially converting those calls into puts.

For example, here are all the adjustments of a call trade that got in the money thanks to market participants’ idiocy (few days ago they were freaking out about job caused recession, today they are in FOMO):
 

abandon dividend investing
 

Of course, the trade is not over yet and it will need more work, but I could roll it and improve my chances of ending this trade as a winner despite being busted. What can you do with busted stocks? Nothing. All you can do is hoping that one day (in 10 years), it will get break even. Like this guy who invested $700,000 of his grandmother’s inheritance into a single stock Intel (INTC):
 

abandon dividend investing
 

abandon dividend investing
 

That guy is not set for 10 years (could be sooner or later) of waiting to see if his investment recovers. Many times these drops happen after regular trading or at dark pools, and we, the small guys, do not have access to this trading and all we can do is to watch our positions destroyed. I had about 40 stock holdings in my dividend portfolio. And I had stocks that were doing well one season for a few months while other were destroyed and vice versa. Then you have earnings reports. Many times the stocks crash 20% on bad guidance and rarely go up. Some stocks like Netflix (NFLX) can drop huge and recover all during after hours trading (so, again, we cannot participate). Others take years to recover. Investing is not what it used to be – buy a good quality stocks and hold them. Even a good quality stocks can get crushed during earnings season thanks to the Wall Street short-sight. And I decided to be done with this.

Will I trade or invest in any stocks then?

I might, but rarely. I will be buying and selling LETF (leveraged ETFs) based on my market metrics like volatility and sentiment. The gauges I was working on work well to get me in the LETFs during bull markets and out into the safety during bear markets. That will be all I plan on trading. Other than that, I will stay with trading futures.

&nbps;
 




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