The greatest trade ever made

Special Weekend Edition

On January 5th, 1920, The New York Times ran this headline:

Ruth Bought by New York Americans for $125,000, Highest Price in Baseball Annals

This is, of course, talking about the Great Bambino himself, Babe Ruth.

Not stocks, but there’s a lesson here regardless.

See, in October the year before Ruth had lamented signing a three year contract with the Red Sox. So he told the press:

“...that I will not play with the Red Sox unless I get $20,000. You may think that sounds like a pipe dream, but it is the truth. I feel that I made a bad move last year when I signed a three-year contract to play for $30,000. The Boston club realized much on my value and I think that I am entitled to twice as much as my contract calls for.”

The war behind the scenes had started.

By December, the Red Sox owner sent out a sell signal, “I’m willing to trade any man on my team, excepting only Harry Hooper.” (Do you know who Harry Hooper is? 😂)

The Yankees made an offer the owner couldn’t refuse.

Did they overpay? Before you say “no” remember, It was five times more than what Ruth was wanting, and even he thought he was stretching when he made that statement. So, I’ll ask again.

Did the Yankees overpay for Ruth?

History says no.

Ruth became the cornerstone of a baseball dynasty we’re still talking about over 100 years later. And Boston spent the next 86 years without a World Series championship -- calling this drought “the Curse of the Bambino.”

When it comes to trading, a deal can be struck between buyers and sellers, where both sides feel good about the trade at the moment.

Of course, the outcome is always unknown. 

Welp, that’s the brief story of the so-called greatest trade ever made.

Despite this horror story of a sale, I still prefer the consistency of selling to buying. Because I’m not looking for one single great trade, I want the statistically long-term probability of profit.

The week was pretty choppy, but overall an up week for equities. One thing I love about my trading system is that it does well in choppy markets. I used to trade a much more complex system with Iron Condors, Verticals, Butterflies, and the like, but I struggled during the chop. “Struggled” is a nice way to say, my stress level went way up while my account went down.

Selling out of the money puts is so much better!

We are up a slight amount toward the Greed side from last week, but still in the middle range of the Fear & Greed Index. This may mean more chop or more room to run. One headline can move this quickly. (It moves downward much faster than it moves upward, generally!)

CNN Business

Why it matters…

From the article:

“The purpose of what I’m doing is primarily to pay down debt, which will happen in very large quantity,” Trump said Tuesday. “But I think there’s also a possibility that we’re taking in so much money that we may very well make a dividend to the people of America.”

I personally think paying down the debt is the best thing to do, but a hybrid approach could be even better. A quick macro economics lesson (from a former economics professor):

If most of the money is used to pay down the debt and the government sends $1000 dividend checks to the people, you would have a great “multiplier effect” as people might save 1%-3%, then spend the rest. If the savings rate is a generous 3%, the multiplier would be 33. So every $1000 would be spent multiple times until $33,000 would be spent. This would be a huge cash infusion into the economy which would juice the markets, jobs and more imports/tariffs. It’s basic supply-side economics and it works well. The danger, of course, is keeping inflation in check with the cash infusion.

So you want to give the kids some spending money, but not too much! 😂

Two real trades collecting $223 of premium for single contract trades. Average Return on Risk (ROR) = 1.37% for this week.

Sample Trade Ideas Spotlight (Free subscribers):

Average Return on Risk (ROR) = 1.04% for this week.

Sample Returns = $100 for single contract trades -- that could cover four months of a Premium subscription, if someone took all of those trade ideas. 

... 

Because it’s Saturday, Premium subscribers get the Special Weekend Edition, including: