Hey 5-Star Trader,
Recently the Nasdaq hit a new, key psychological target of 15,000. While this is notable news, I’m still cautious. Instead of buying options contracts right now, I’m buying stock. Here’s why:
- Slow to reach the highs
The Nasdaq reached new all-time highs, but it was a slow crawl to get to where it is. There was no giant swing to the upside, instead it just slowly crept up to 15,000. New highs can be exciting, but without momentum in the market, options trading can be difficult.
- Traders aren’t trading
Summer is notoriously a slow season for the market. In any regular year, people choose to take time off and spend it with their family. Now that the pandemic is almost in our rearview mirror, there is an even higher number of people traveling than what’s typical. I’m included because I just got back from Las Vegas!
With fewer traders in the market, there is inherently less momentum to trade options.
But why is the lack of momentum a problem? In order to get the best results in options trading, it’s optimal to have greater than expected moves and consolidation. If this doesn’t happen your options will end up decaying and losing value over time.
Since the summertime lul seems to be here to stay, instead of loading up on options, I’m seeing this as a great time to buy stock. Stocks can be a longer term investment that can be more resilient to market moves. Stocks can appreciate in the long term and you can synchronize with your options trading so you can enjoy that summer vacation!
Interested in what stocks Danielle is buying? Join her free webinar, the “24/hr Stocks Growth Formula.” There Danielle will show you how she beats financial “advisors” and takes control of long-term investments!