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Hello:
I hope everyone is enjoying their weekend, and I wont be long.
A couple items came up that need to be addressed, and without the hassle of the markets open I felt it was a good time to attack them now while I am writing material anyway.
IT
People asked three question about the class that I want to get out of the way one time.
Question: Why is the class material going to be only about 100 pages? What are you trying to pull?
A – First, it will probably be more than that, but I want to under promise. I have been slammed making claims that seem reasonable in the moment until 30 things I didn’t expect pop up into view.
B – Second, this class has to be as practical as possible as people get very nervous when they feel they have exposure. The human brain (and often some other book/company) has told them that risking $1.50 to make $3.50 is genius. Then when we flip that over people get scared.
Think about the math though. When you buy a spread for $1.50 and can make $3.50, generally you will have about a 20% chance of making money, a 20% chance of breaking even, and a 60% chance of losing money. The reverse is true for the seller (obviously).
(See Math Below)
NOW compound the problem of time erosion. You may have a 20% chance of losing money when selling the vertical spread when you place the trade. But every day that goes by has the probability curve shrinking, making the probably of losing money shrink.
C ā Third. This class is going to be highly class participating and slide dependent. This is going to be our only class (to date) where watching the video and/or attending the class is required. Out previous classes could have been done by reading the book and maybe watching the videos when lost. You can’t get away with that on this one.
Stated another way, instead of massive amounts of written material this class is mostly taught by the power of slides and paper trades. So DON’T FEEL like I am trying to get away with not writing material. Trust me when I say it is easier to write 40 pages of material than it is to make 40 intensive slides that tell a story better than text can.
This is the opposite of lazy, and another reason the text is going out ahead of time.
TWO ā When Will The Market Fall?
Heck if I know. I thought for sure we would fall at the end of March. My failing on that prediction is because of two things. The first is that the markets went into a holding patter for the start of the year, thus we didn’t get a chance to go into overbought situations. Second I was making that prediction a year ago when the world was falling apart because of a government shutdown and Syria. It is easier to predict the markets in 1 day than 1 year.
Besides, for someone who made a living off of trying NOT to guess the direction of the markets, it was not a bad guess. I was buying at Dow 13,000 when the rest of the world was thinking we were going to war and the politicians were saying the shutdown would ruin capitalism.
It is coming though. What would have me thinking this is going to be sped up is watching interest rates rise. They (interest rates) have been stable to going lower on short covering. I suspect that most of the short covering is coming to an end and the bond market can resume its uninterrupted natural (instead of artificial) move.
THREE ā The Next Mini-Class
Question: If this one class or two?
Great question. I am not sure I was specific enough previously. The answer is YES.
It is one class broken down into two components.
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What month to use
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Time Spreads
It is a longer class (4 hours instead of three) and will be broken into 2 class of 2 hours each. There will be a 10 minute break in between so you can change gears, get coffee, stretch, etc, and so I can drink heavily.
