Thursday Shopping List

Win some and lose some.

Long TSLA, short META.

That was the right trade to have at the beginning of the week.

When we saw how forgiving the market was with the car-making company, we thought the earnings season for the Mag 7 would be a piece of cake. Once again, the markets never fail to disappoint. META is down 14% in pre-market trading this morning, dragging the entire Nasdaq complex. Quite the way to start a busy Thursday: GDP reading for Q1, alongside some inflation numbers (more tomorrow), and MSFT and GOOG earnings post-market.

That's enough catalysts to get caught in a move and, when you finally change your mind, get caught again in the reversal.

Day trading is hard, so why make it harder by trading directionally? Worse yet, why would you use options, a fantastic instrument, to express a view on the betting line rather than the binary outcome? Oh, it doesn't mean you won't lose once in a while. Yesterday, for instance, we shorted the volatility in QQQ, thinking it was abnormally inflated before META's earnings. Turns out, we were wrong. Just imagine how much worse it must be to be long this morning.

In trading, you win some, and you lose some. But when you have an edge, if you repeatedly do the same thing over and over again and manage your risk properly, you have a much better chance of being profitable and beating the market.

It's less exciting, but seeing your account grow over time is quite a feeling.

Speaking of being mechanical, it's Thursday, which means it's time to sell a few 1DTE options overnight and close them at tomorrow's expiration.

Let's take a look.

The rules

Before we start, let’s do a quick round-up about the rules.

• Short an ATM straddle in the 1DTE contract 26/04 as close as possible to Thursday night's close. In all our metrics and charts, we assumed an execution at 3.50 p.m., but the entry timing doesn’t matter too much: avoid getting in too early, but getting in too late gets you less premium.

• Exit the position as close as possible to Friday's expiration. Again, we assume an execution at 3:50 p.m., but depending on your risk tolerance and satisfaction with the returns, it can be useful to manage the position earlier.

• One word of caution: if you get assigned, leave the trade altogether and eliminate the underlying. If you decide to keep it and “sell premium against it,” it is at your discretion and outside this strategy's scope. It’s okay to keep the other leg expiring out of the money; there is no reason to pay an extra dime to your broker. Ensure it is far enough from any post-market move — the settlement happens at 4.15 pm, not 4 pm.

One last thing—our Discord community is now burgeoning. You can find a few professionals in the industry and professional retail traders.

Yesterday, one of them was kind enough to show his fully automatic trend-following system—a DIY CTA, if you prefer. It's very impressive. We monitor the Thursday Shopping List, the Signal Du Jour, and many others mentioned in this newsletter. Contact us if interested, and we will share the pricing details.

The list

Let's start by reviewing last week's results. With an elevated VIX for the first time in a month, it finally performed, leaving more than scraps on the table. However, it was also a strong reminder that normalizing your position sizing is crucial.