The foolishness of the perfect trade

Special Weekend Edition

I’m sure you’ve heard of the Pareto principle:

80% of the results come from just 20% of the work.

Those aren’t hard and fast numbers, it could be 85/15 or 90/10, but the sentiment of the principle remains. The question that can naturally be brought up is “how much time do I spend on trying to grab that extra 20% of results?”

It seems like the ROI for that last 20% is pretty bad.

Greedy people will try and grab that last 20% anyway, often ignoring the cost in time & energy because they care about the money too much. I think that’s a part of what Mr. Zweig was tapping into here with his quote.

The more I trade, the more comfortable I get with ignoring that last 20% and enjoying grabbing my 80%.

The reality is that I’m never going to be able to grab 100% of a market move.

But, if I’m profitable, who cares?

I can make a great living taking these easy trades selling Options in the markets without spending a lot of time & energy. I have no need to maximize my profits when I can let compounding results bring in more than enough over time.

I want to challenge you this weekend to think about where you might be being too greedy in your trading. Maybe you aren’t and this becomes just a check-up. Or maybe you are and this is the gut-check you need.

I’d be interested in hearing from you either way.

The market was basically even for the week and mixed at the close. Bitcoin was on a rollercoaster hitting near the all time high, then falling sharply to $117k.

“So what had happened was…” Bitcoin hit $125k which is a huge psychological level.  Lot’s of folks had sell orders when it finally hit $125k and they all kicked in at once. When the price fell because of all the sell orders, people panicked a bit and sold to protect their profits at lower levels causing further pullback. And the beat goes on… Well, that’s my story and I’m sticking with it!

We jumped from 59 to 64 this week on the index. This generally points toward a pullback in the near future.  Good time to increase cash positions and get ready for opportunities to present themselves.

Bloomberg

Why it matters…

The meeting did not go well.  We did not get many details in the “Presser” after the meeting, but it was written all over the President’s face and he uncharacteristically took no questions. I would not be surprised if this cast a pretty large shadow over the market opening on Monday. The VIX could elevate a bit on lower prices.  The market does NOT like uncertainty.

New economic data releases could increase mortgage rate volatility ahead of the Fed's September meeting.

Yahoo Finance

Why it matters…

Lots of economic data has come in and much more to follow before the Fed meeting in September. It is so far away (“in market years”) that this headline doesn’t mean much, but it is interesting that the mixed data has been digested as a rate cut is still on the table.

Home selling season is in the spring and early summer.  The Fed missed the season, so lower mortgage rates won’t mean much until next year anyway. By then we should be 2% lower, so spend the fall and winter getting that house “show ready” if you are so inclined.

Two real trades collecting $51 of premium for single contract trades. Average Return on Risk (ROR) = 1.57% for this week.

Sample Trade Ideas Spotlight (Free subscribers):

Average Return on Risk (ROR) = 1.28% for this week.

Sample Returns = $318 for single contract trades -- that could cover over a year’s worth of a Premium subscription, if someone took all of those trade ideas. 

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