Be Afraid When Others Have FOMO
It’s natural to have some FOMO (Worry of losing out) after the rally we have actually had off the April lows. I have some myself. At the end of March, I thought properly that shares of Robinhood Markets ( HOOD), a Portfolio Armor leading 10 name at the time, were most likely near a bottom. As I composed then, in a pre-market note, when the futures were a sea of red:
I’m reducing the strike on these HOOD puts by $2. This puts our break even on the stock at $34, which has to do with its 200-day rapid moving average, which looks like a possible near-term bottom for it.
However rather of purchasing OTM (out of the cash) contacts HOOD, I offered places on it.
The stock is Robinhood Markets ( HOOD 0.05% ↑), which I believe would be a terrific long term holding if we can get it in the $30s. So I put a GTC order to offer the $38 strike placed on it ending on May 9th for $4. If that put gets worked out, I will have efficiently purchased the stock for $34. Limit gain on one agreement is $400, limit loss is $3,400 (presuming the put gets worked out, and after that the stock goes to absolutely no), and the break even is with HOOD at $34.
This trade hasn’t filled yetThis trade filled at $4.30 on 4/3/2025
Preventing FOMO And ROMO
I see shares of Robinhood trading in the low $60s now and understand I might have made ~ 2,000% purchasing OTM recalls then rather. Exact same with Palantir Technologies ( PLTR), another PA leading name at the time. I made some modest revenues (~ 150% gains) on some fairly conservative choices trades on it, however OTM contacts that would would be up >> 10x now too.
Possibly FOMO’s the incorrect word for what I have. It’s more like ROMO (Remorse of losing out). However a few of you reading this most likely do have FOMO, and are lured to purchase now.
So What To Do Now?
Be prepared if there’s another leg down. Then you may get an opportunity to purchase your preferred stock for less. Here’s why that may occur this summertime.
In spite of the bullish headings today– trade contracts, reducing stress in between the U.S. and China, and market technicals pointing towards continued upward momentum– there’s still trigger for issue.
Initially, Treasury bond yields stay raised, signifying consistent issues over inflation and higher-for-longer rate of interest. Even with some favorable trade news, bond financiers appear doubtful that inflation has actually been beaten, or that the Fed will fast to cut rates.
Second of all, the existing U.S.-China trade offer consists of just a short-term, 90-day suspension of brand-new tariffs. The threat stays high that stress might reignite, especially if either side views an absence of follow-through on guaranteed concessions. Markets have actually consistently undervalued the fragility of trade truces in the past, resulting in abrupt and sharp turnarounds.
Plus, financial damage from months of raised tariffs and interfered with trade circulations might currently be baked in. Producers, merchants, and worldwide supply chains have actually taken in substantial expenses and disturbances, which can continue to weigh on incomes and customer costs even after a preliminary offer is struck.
Lastly, assessments in significant indices stay extended relative to historic averages, leaving little space for mistake.
The Case For Bear Repellant
If you’re totally invested now, and we get another leg down in the market this summertime, you will not have any dry powder to purchase beaten-down stocks with. If you take the opposite tack, and simply remain in money, you’ll have 2 other issues. Initially, FOMO might end up being alluring. Second, if the marketplace keeps going greater for the remainder of the year– or longer– you’re going to lose out on all those gains.
A little bear repellant (hedging) goes a long method. A couple of percent of your portfolio in alternative hedges can swell to a large position in a market crash. Your valued choices will be dry powder you can transform to cash to purchase stocks near the bottom. If you desire a simple method to discover ideal hedges, you can download the Portfolio Armor app by intending your iPhone video camera at the QR code listed below (or by tapping here, if you read this on your phone).
And if you wish to prevent ROMO with me next time, you can sign up for the Portfolio Armor trading Substack/occasional e-mail list listed below. Next time the marketplace tanks, I’ll be swinging for the fences.
If you want to remain in touch
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