Navigating the Drop in Equity Market

Trader see the trade of the week inside... You receive this email, because you signed up to get email from YellowTunnel newsletter on 11/21/21.  If you no longer wish to receive any emails from YellowTunnel, please use the "Unsubscribe" link towards the bottom of this email. [Image] May 5th, 2024 | Issue 233   Hello Trader, Greetings fellow investors! As we ride the waves of market volatility, it's crucial to arm ourselves with strategies tailored to these uncertain times. For those unfamiliar, allow me to shed some light on long volatility option strategies. Picture them as your financial life jacket in choppy waters, designed to thrive amidst market fluctuations.  Long volatility strategies anticipate an uptick in market turbulence. When volatility rises, so do option prices, reflecting the heightened uncertainty. One key metric to understand here is Vega, which measures an option's sensitivity to changes in volatility. With that in mind, let's explore some common long volatility plays:  First up, the Long Straddle. Think of this as casting a wide net, buying both a call and a put option at the same strike and expiration. The goal? To profit from any significant move in the underlying asset. As volatility climbs, so do the chances of one of these options hitting the jackpot, ideally covering the premiums and then some.  Next, we have the Long Strangle, a cousin of the Straddle. Here, we're buying out-of-the-money call and put options at different strikes. It's a bit like setting up shop on the outskirts of town, requiring a smaller initial investment but banking on a larger move in the asset's price to turn a profit. As volatility spikes, so does the potential payday.  Now, let's talk Backspreads. This involves selling an option at a lower strike and buying more options at a higher strike. It's like hedging your bets, primed to benefit from both a surge in volatility and a substantial move in the asset's price.  Lastly, Buying Calendar Spreads. Here, we're playing the short and long game simultaneously, buying a longer-term option and selling a shorter-term one at the same strike. The aim? To ride the wave of "volatility crush" post-event, all while maintaining exposure to longer-term volatility.  Each of these strategies dances to its own tune, demanding meticulous planning and attention to market conditions. They're your secret weapons when you're expecting fireworks but unsure which direction they'll light up the sky. But remember, while profitable in high-volatility environments, they're not without risks, particularly if the anticipated volatility surge fails to materialize.  Each approach demands meticulous planning, tailored to the specific nuances of the market landscape. They are deployed when significant price movements are anticipated, yet the direction of these movements remains uncertain. While these strategies hold the potential for substantial profits in a high-volatility environment, they are not without their risks. Should market conditions diverge from expectations, the potential for losses looms large. However, having a measured approach and strong trading plan allows me to trade confidently.  Allow me to illustrate this with a recent example from my own trading endeavors. This past week, I engaged in trading both put and call butterflies on $AMD. Anticipating a move of 2 standard deviations to the upside, I positioned myself to capitalize on the inherent volatility, thus assuming a long volatility stance. My strategic choice of the 140 strike, where open interest was most pronounced, underscored a calculated approach to strike selection.  As fate would have it, the company's earnings guidance fell short, catalyzing a swift ascent in $AMD's stock price. Within the first hours of the trading session, the stock surged to $140, aligning perfectly with my expectations. Leveraging this opportune moment, I swiftly closed my butterfly position, reaping a handsome profit of over 50%.  Below you can see the dynamics at play, showcasing the high open interest concentrated at the 140 and 200 strikes, coupled with a pronounced demand for calls, thus creating a notable call skew. [Seeking the Next Big Opportunity? Look No Further! Click Here]( Now, as I take a break from the hustle and bustle of the market, basking in the Florida sunshine with my loved ones, I'm reminded of the importance of balance. These moments of tranquility fuel my passion for the trading desk, reinvigorating me for the challenges and opportunities that lie ahead.  Stay tuned for more insights and strategies tailored to weathering the financial storms together. Until then, happy investing! If you like this blog, share it with your friends, frenemies, and perfect strangers.  ([they can subscribe here](   WE ARE NOW ON THE X PLATFORM  Every day, I highlight our best strategies and potential trading setups via the X platform.  Check it out!  [Click Here>>Â]( (Advertisement) [Unlock Daily Wins: Get $300 Off Our Premier Financial Newsletter!](  I'm Vlad Karpel, and I'm thrilled to offer you an exclusive opportunity to transform your trading skills. Join me LIVE every day for a daily masterclass that you won't find anywhere else. This is your golden chance to gain insider insights as I make real trades in real time, right before your eyes.  Don’t miss out on this unique learning experience. For a limited time, we’re offering $300 off when you subscribe to our premier financial newsletter. Elevate your trading, understand market dynamics better, and start making smarter investment decisions today. [Sign Up Now!]( Vlad Karpel Chief Investment Officer/Founder    TRADE IDEA OF THE WEEK Positioning with PSQ In light of the prevailing market dynamics and the escalating volatility, one inverse ETF that warrants close attention is the ProShares Short QQQ ETF (PSQ). The ProShares Short QQQ ETF is designed to deliver daily investment results that correspond to the inverse (opposite) of the daily performance of the Nasdaq-100 Index. This inverse ETF provides investors with the opportunity to profit as the Nasdaq-100 Index declines, making it an appealing option for hedging against potential downturns in the tech-heavy Nasdaq market. Against the backdrop of mounting inflationary concerns, geopolitical uncertainties, and cautious market sentiment following the recent FOMC meeting, PSQ emerges as a compelling choice for investors seeking to shield their portfolios from potential downside risks. With technical indicators signaling potential downside risks and the market exhibiting a tightening trading range, acquiring shares of PSQ could offer a strategic hedge against market turbulence in the upcoming week. Drawing insights from our comprehensive analysis of market conditions and leveraging the latest artificial intelligence data, initiating a position in PSQ represents a prudent move to fortify one's portfolio amidst prevailing market uncertainties. As we approach the upcoming week, the strategic allocation to PSQ not only provides a defensive stance against market volatility but also presents an opportunity to potentially capitalize on bearish market trends for astute investors.  This week, I’ll be adding ProShares Short QQQ ETF (PSQ) to my portfolio! [Click here to read more about this week’s Power Trade pick…]( [Image] To great returns, [Image] Vlad Karpel YellowTunnel and Tradespoon Founder P.S. [Click here]( for access to the Power Trading Live Strategy Roundtable Recorded every Thursday. DISCLAIMER: Vlad and his team may have a financial interest in the picks as they trade many of the same equities and options they pick. Vlad Karpel and YellowTunnel (Company) is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. All investing strategies are made available to the general public on a regular basis. We do not provide personalized financial advice or investment recommendations. As an investor, you know that any kind of investment opportunity has its risks. There is no such thing as low-risk stocks and we recommend you invest wisely and that only risk capital should be used to trade. Investing in Stocks and Options is highly speculative. No representation is being made that the use of this strategy or any system or trading methodology will generate profits. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed here and on our website. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE SUCCESS: It should not be assumed that the methods, techniques, or indicators developed at YellowTunnel will be profitable or that they will not result in losses. Nor should it be assumed that future picks will be profitable or will equal past performance. All of the content on our website and in our email alerts is for informational purposes only and should not be construed as an offer, or solicitation of an offer, to buy or sell securities. Remember, you should always consult with a licensed securities professional before purchasing or selling securities of companies profiled or discussed on YellowTunnel.com. Performance results that are discussed above are from the Live Trading Room. Multiple YellowTunnel tools were used to achieve these results. Trade % Gain/Loss is calculated by dividing the $ Gain/Loss by the Max Risk, which is the posted Stop Loss for the trade. Yellow Tunnel’s performance data represents the average return on all trading recommendations from January 1, 2020, to today. *Win rate percentage reflects the average that Yellow Tunnel’s software helped me identify a profitable investment strategy.** Triple-digit returns are not typical and are not intended to reflect the likelihood of similar returns in the future. This email was sent to {EMAIL} by info@yellowtunnel.com. Questions or inquiries regarding the website and/or service may be submitted via email to i[nfo@yellowtunnel.com](mailto:Info@Yellowtunnel.com?subject=Questions%20or%20Inquires%20PTM%20Blog). You may also complete our [inquiry form located here](.  YellowTunnel LLC, 318 Half Day Rd., Suite #215, Buffalo Grove, Illinois 60089. Website: [](  Copyright © 2024 Yellow Tunnel LLC. 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