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  • Dani

Vaccine Mental Rehearsal

Yesterday as I was trading, my wife told me that they said on the news that there is a breakthrough in finding a Vaccine for the corona-virus in Israel. I immediately felt adrenaline pumping in my blood stream, and with no hesitation bought 100 Calls with a strike of 264 that had only 3 hours until expiration (QQQ was trading around 261 at that time).

In my options course I talk against buying low probabilities OTM options because they are like buying lottery tickets and you will lose money on them most of the times until you blow up your account. However I was willing to make an exception today, because if they found a Vaccine in Israel and they still don't know about it in the world, I need to be positioned to profit from a huge move up.

I bought 100 Calls for 0.14$ each (1400$) that will give the same exposure as holding 10000 QQQ above 264 in the next 3 hours (2,640,000$ !!! or 10K$ profit for every point over 264).

I was waiting to hear the breaking story on the news, but they just keep on talking on other news. After 30 min I decided that maybe it's not as they said so I sold back 60 Calls to take out the risk (NL).

Then they just talked about old news from the previous weeks of progress that was made by MRNA and PFE and I knew there is nothing new here, so I sold the rest of the Calls for 0.07$, gaining a small profit of 270$.

At the end of day, less than 2 hours later as AAPL and FB exploded, and the QQQ made a 1.5% move, the Calls that I sold expired at 2.07$. (my initial 1400$ could have been 20K$).

So why am I telling you all this?

I wasn't upset for missing the big move up, but instead I realized that I still didn't make any plan for the day that the Vaccine is found.

There are a few question to consider:

  1. How much an I willing to risk in an one in a life time event? (not my regular 1R)

  2. Do I care about BE or should I just let it run? (no BE).

  3. What symbols am I going to concentrate on? (airlines? cruze? index? others?).

  4. How can I use options to maximize my profits in one of the best days that the market will ever going to have - (good probabilities for that) ? (OTM options?)

  5. Is my Core portfolio positioned to profit from a move if the announcement will be outside the regular trading hours? (protect my swing shorts with calls or use only puts, buy LT calls for 6-20 months).

  6. If the market opens at 7%-10% up do I still want to buy?

As you can see there are many question you need to ask yourself and now is a good time to start preparing.

Ken always talks about the need to Plan-Prepare-Execute-Assess.

Then when I will have a plan, I also need to visualize myself trading in that future day and to mentally rehearse that plan.

I'm going to be ready. What about you?

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