I Got A Pocket Full Of Quarters

…And I’m heading to the Arcade.

I don’t have a lot of money, but I’m bringing everything I make.

I got a callus on my finger and my shoulders’ hurting too.

Gonna eat’em all up just as soon as they turn blue.

‘Cause I got Intraday Margin Fever…

When I was a 6 year old kid growing up in Milwaukee, my dad used to take me and my brother along to his Friday night bowling league. To keep his favorite pests occupied while he was having a beer and bowling with the neighbors, he would ration quarters to me and my brother for the arcade there. Defender, Spy Hunter, Tempest, Donkey Kong and of course, Pac Man.

After burning through our quarters, me and my brother would ask for two more. The greatest rush in my six year old life was when we would ask for 2 more quarters, and get 4! OMG!!!!! I think my dad looked at it as a good ROI on his time.

My cousin gave me the Pac Man Fever 45 when I was 6 or 7. I listened to it until it broke, literally.

For the past two weeks, I feel like a 6 year old kid again when I get out of bed in the morning and the market opens. Only with $1000 in quarters. OMG!!!!!! So much fun!!!!!!!!

Yesterday Interactive Brokers (IB) announced, in a very cryptic way, what appears to be no more intraday margin. Sorry about that, you’ll have to live with 1:1. I never understood why so many traders flocked to IB.

Trader Workstation looks like something community college interns on mushrooms cooked up. Just about everything about them leaves an unpleasant aroma, I used them for several years when I was a retail trader. Execution, commissions and customer service have the lovely scent of a fresh pile of giraffe droppings after five buckets of KFC extra crispy.

Think or Swim? Yes! Better in just about every respect, except maybe hard to borrows.  If you’re a retail day trader, there are even brokers in the Caribbean that will give you 6:1 intraday and are much better than IB.

Not that it matters much, with the volatility, you can still probably get plenty done with 1:1 and the leveraged ETFs.

Today I’m going to try to right a key mistake I see many of you day traders making in the comments section. By the verbiage I see being used, I understand the source of your misguided ways. You are forgiven – but heretofore, ignorance is no longer bliss. I don’t expect any of you to listen, but I’ll at least put some karma points in the bank for trying.

The choice of stocks I see being intraday traded in the comments section leaves me, routinely, saying WTF!?!?! TLT? You gotta be tripping… So here is your quick cheat sheet to get on the same page as the pros.

1. The stocks you should be trading intraday are the Stocks In Play. Or In Play for short. That means they are moving a lot more than the rest of the market. Not with the market, a lot more than the rest of the market. Even when the market is limit down. Usually this means looking for excessive pre-market activity, a large gap up/down, huge volume and follow through after 45 minutes in the session. Hint: these are usually not DJIA components. 1B – An exception is things that are doin’ their own thang when the market is moving in the opposite direction. As an example, NFLX had been marching to it’s own drum for a few days, while the rest of the market was in free fall. But it eventually got in line with the rest of market and caught a south bound train. That is something you should also be focusing on..things  that  doing  their  own thang. The airlines (and BA getting prison raped) have also been moving a lot more than the rest of the market and make excellent targets for the moment.
2. Because of #1, that can often mean trading stocks that you’ve never heard of before. Like a SPY400 mid cap that’s moving 19% today. Focus on the long side, trading short in many of these is going to leave you with the hard to borrow blues. This is a benefit pros have, usually things that are moving pre-market can be borrowed before the market opens so we’re ready to pump some lead in them when they start following through on the short side. Can’t trade any hard to borrows short? Your next choice, should it be heading south, is QQQ and then SPY. Statistically, compared to just about every stock in the universe, they score extremely high on the intraday momentum scale. You can also use the inverse leveraged ETFs. Get yourself a good stock scanner.
3. In this environment, day trading options on retail platforms should be limited to the indexes SPY, QQQ, VXX and a few others. The spreads are too wide and there is a good chance there may be no one to take the other side of your trade when you need to GTFO. Well, someone will place a NBBO (National Best Bid-Offer), but they know they have you by the cojonies and you’re going to pay to get out. This past week, I’ve seen this even in some SPY options that are deep ITM.
4. Correlation. If you’re trading QQQ, AAPL and AMD, chances are a full U-Turn-Jones is going to take you out of everything. Especially now. Even if you’re trading TLT, VXX, SPY, GLD, they are all heavily correlated. Especially when we’re in state of huge margin calls and we have across the board selling to raise cash, like we did yesterday.

Day traders, that make a good living, are trading stocks that are in play. Write it down. Etch it into your brain. Make a jingle out of it for yourself.

“Traders that get paid.. are trading stocks in play…”

If you can get on that program, long term, you’re likely to do much better. Four things is a lot for most people to follow through on. So if you’re going to stick to day trading stocks, then do #1 and #2.

In other exciting news, I’ve been focusing my trading on SPY and QQQ options. There are so many juicy trades to be had here, especially on expiration day. OMG! It’s like having a fresh 48″ of powder to ski down every morning.

I wouldn’t be holding anything overnight now, unless you’re properly hedged. It’s been very difficult to get hedged (inexpensively) either way right now, especially on the short side with option premiums being insanely high. Despite that, I have a low risk ($2.00/leg) magic trick I’ve been using to hedge with a 3.5:1 upside I’ll share with the subscribers below.

If you haven’t been making money the last two weeks, chances are you never will and your trading future needs some serious consideration. You should be printing money right now. You should have the Brinks truck stopping by everyday with your daily stipend of cash. If not, best move to the sidelines before you wreck yourself and learn some new tricks.

That’s it for my soapbox. Peace and love, it’s expiration Friday!!!!! SO EXCITING!!!!! Go forth, kick ass and vigorously copulate with the market.

I’ll pass the mic back to Mole next week and have him spit dope AF market rhymes at you.

P.S. “Traders that get paid.. are trading stocks in play…”

P.S.S. Before I peace out, the as-promised low risk hedge magic trick… here it is.

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