Hey there, VWAPians!
This market is phenomenal and it just doesn’t want to go down.
This makes it virtually impossible to stay short in this market.
But I have a secret weapon. VWAP.
VWAP – the one indicator to rule them all.
There’s a reason that I call VWAP the EKG, or heartbeat, of the market.
VWAP is like a magnet. When stocks start to retrace, they retrace back to VWAP.
If VWAP is Batman, then the Multiday VWAP is Robin. They’re the dynamic duo at the heart of my intraday trading style.
And the Multiday VWAP that members of my Warlock’s World know and love was made possible, in part, by my homie – Solid Jell-O.
He’s one of the smartest cats in the game and an O.G. VWAPian.
Since 8-Baller and I will be busy hightailing it to Baltimore to party with Money Map Press, my man Solid is stepping into the Warlock’s World spotlight at noon ET to drop knowledge bombs and chew gum — and he’s all outta gum.
I can’t WAIT to hear what my Warlock’s World family learns from one of the very best ever to do it.
I say “one of” the very best, because I’M the best.
That’s why I was able to snag winning VWAP trades on stocks like Stitchfix (SFIX) and Chargepoint (CHPT).
Before I get to those trades, I know that a LOT of my Warlock’s World family have been asking about options.
For a smaller account, options trading can be a fantastic way to trade higher-priced stocks that you might not have access to otherwise.
And here’s a hot tip for rookies — options can provide extra oomph to the upside, but can also give that same exposure to the downside.
There are a lot of factors to consider when it comes to options trading, and as the Prophet of Profits, I want to make sure my VWAPians understand what they’re getting themselves into.
I’m still working on the WHEN (we’ve got a PARTY first, after all), but SOON I’m going to host a special options session for my Warlock’s World members.
Outside of not wanting to pay for time value I don’t need, the reason I choose trading stocks over options every time, is that generally, the stock has more play; there’s a tighter spread.
The bid/ask spread on options can be up to five times the spread for stock!
This makes market orders for options virtual permission slips for market makers to rob you.
I don’t want to see VWAPians giving away their money on the spread created by option market orders.
So Warlock’s World crew – keep your ear to the ground and an eye on your inbox, as I’ll be sure to let you know when the special options session is coming.
Stitchfix was on my radar Wednesday because they had recently reported earnings.
They sell clothes online? Who cares. Fundamentals don’t matter to VWAP day traders.
But Kenny, they pick out special clothes and accessorize for you!
Big deal. My wife does the same thing for free. (And Bababooey’s always there to make sure I know the difference between khakis and Dockers).
SFIX was on my radar, and I was sure to let my VWAPians know EXACTLY what the stock would do.
Now look at this:
I’m the carnival barker of stocks.
This stock got PUMMELED after earnings. But I don’t care about that. All I care about is 1-minute Multiday VWAP reversals.
SFIX had a double bottom at $17.92, which I marked on my chart with a red horizontal line.. When it broke the 1-minute VWAP (blue line) to the upside, I was IN, with my stop set AT VWAP. I’m not losing money on this trade.
The stock then rallied EXACTLY to the $18.70 level, and within minutes was at $19.30.
The entire stock market revolves around me.
CHPT also sold off after earnings. Probably because the stock STINKS and is probably going to ZERO, like the rest.
But because Chargepoint had reported earnings, I kept an eye on the shares.
CHTP went blue line to orange line Dec 8.
A stinky company reported stinky earnings, the stinky stock broke down, broke below VWAP, I bought it, CHPT rose above 1-minute VWAP to Multiday VWAP.
Bada-bing bada-boom, how YOU doin’?
I was stopped out of the last of my shares, but I also traded very short-term $20-strike call options, something I don’t usually do.
The entry point for most options trades are the same as the stock — around VWAP, usually relatively near the money.
I entered CHPT $20-strike calls when the stock broke VWAP, for $0.75, or $75/contract.
The tricky part of day trading options is the STOPS. With options I use a STOP LIMIT.
After a stop order is put in for an option, when the stock’s share price hits that mark, it triggers a market order for the option.
Since options often have wide bid/ask spreads, once the order to close the option trade goes to market, the trade could execute for LESS than the options’ current value.
This is how market makers try to take your money. And this is why I use STOP LIMIT orders with options.
With a STOP LIMIT, once the stock’s share price hits the stop, instead of triggering a MARKET order, it triggers a LIMIT order.
So basically, instead of saying, “I want to sell my option now, at the current market price,” my STOP LIMIT order says, “I want to sell my option now, but at my predetermined price (and I won’t take a penny less, you thieves).”
Sometimes the bid/ask spread on options is so wide, the difference between an option’s value and the filled order price can be $0.50 or $1 per contract.
That doesn’t seem like much, but if I’m trading 10 contracts, that’s $50 or $100 (since each contract represents 100 shares of the underlying)!
THIS is the EXACT kind of topic that I look forward to going further in depth on in the future.
I know that my Warlock’s World family are hungry to learn more about options, and I can’t wait for the special options session that I have coming REAL SOON.
That’s all for now, VWAPians! I expect Warlock’s World members to be on your BEST behavior for Solid Jell-O. If you misbehave, he’s writing down names!
Best of luck in your trading!
Kenny “The Warlock” Glick
December 09 2021