Day 1: Market Rebellion Trading Conference Recap

What a day in Las Vegas for Market Rebels.

In case you missed it, we wanted to pull some of the highlights of the day and share them. So here we go.

Ryan Mastro: You don’t have to let a short option position go to $0

As is always the case, the Market Rebels focused a lot of their discussion on risk management, dispelling myths and teaching those in attendance how a professional, long-term trader manages risk. One of the best nuggets came from our Chief Options Strategist, Ryan Mastro, who was talking about the idea that if you’re collecting premium, you don’t have to let the position expire worthless. In fact, you should take off the risk before it does.

That’s because an options position isn’t a set-it and forget-it proposition. It is dynamic. And even if you have a spread on that caps your potential losses, why would you risk giving up $9.50 to collect another $0.50? You don’t know and can’t control the news flow… so why keep the risk? Take your $9.50 and find another trade to better deploy that capital.

Tony Dwyer: Listen to what the guys printing the money are doing

Tony Dwyer, chief market strategist at Canaccord Genuity, gave a much better and more thoughtful spin to the old adage, “Don’t fight the Fed.” He said that you have to listen to what they’re saying.

Don’t use your brain power to figure out which is the best inflation measure out there. Just listen to the Fed on which inflation measure they’re going to use (Core PCE Deflator). Simultaneously, don’t worry about if they should raise rates and when… listen to what they’re saying. And if they’re saying that they’re not thinking about thinking about raising rates, you have to take them at their word.

As big of a bull as ever, Tony gave us a full macro outlook and, more importantly, showed us the rationale behind it.

Bill Johnson: Speculating isn’t bad… you just have to know when you’re doing it

We all like to blame the nefarious speculators taking on big risks when things go awry. It’s natural. They don’t seem to be a natural part of a market — they’re bettors and gamblers trying to make a quick profit.

But Bill Johnson reframed the debate and challenged us to think about what speculation and hedging truly are. And, in that, he reminded us that we’re all speculators.

That said, the one thing that makes speculating bad is when you don’t know you’re doing it and, instead, you think you’re hedging. For instance, someone who owns shares of stock and sells a covered call thinking they’re hedging. They’re not. Or someone who owns a call and then buys a put thinking they’re hedging. They’re not. But someone who owns stock and buys a put is hedging.

If those aren’t intuitive, then think about the easy definitions of speculation and hedging:

• Speculation is when you assume risk in order to make financial gain.
• Hedging is when you remove some risk and thereby limit in some way your financial gain.